• The Indian Rupee opens on a cautious note against the US Dollar ahead of trade talks between the US and India.
• India’s retail inflation increased to 1.31% in December, missing the estimate of 1.5%.
• Investors await US CPI data for fresh cues on the Fed’s monetary policy outlook.

The Indian Rupee (INR) trades lower against the US Dollar (USD) on Tuesday at around 90.50, ahead of trade talks between the United States (US) and India during the day. The USD/INR pair is expected to remain on the sidelines as the impact of the trade meeting outcome will be significant on the Indian Rupee, given that the Indian currency remained the worst-performing Asian currency in 2025 due to hefty tariffs on imports from New Delhi to Washington.

On Monday, US Ambassador to India, Sergio Gor, said that both nations will meet to discuss trade issues on Tuesday. Gor also said that India will be invited to join Pax Silica in February. Gor's announcement of US-India trade talks led to a significant recovery in the Indian equity market. Nifty50 clawed back the intraday decline of almost 250 points or 0.9% and turned positive before closing.

In 2025, US President Donald Trump raised import duty on goods from India to 50% after including 25% punitive tariffs for buying oil from Russia, making Indian goods less competitive in the global market. Earlier this month, Trump also threatened that he could raise tariffs on India for not supporting the Russian oil issue.

Trade frictions between the US and India had also hit the interests of overseas investors in the Indian stock market. Foreign Institutional Investors (FIIs) remained net sellers in eight out of 12 months in 2025, and have extended the pessimism in 2026 too. So far in January, FIIs have offloaded their stake worth Rs. 15,425.22 crore.

Daily Digest Market Movers: US Dollar trades slightly higher ahead of US CPI data

• A slight uptick in the USD/INR pair is also driven by a marginally higher US Dollar. As of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades 0.1% higher to near 99.00.
• On Monday, the DXY corrected sharply from the monthly high of 98.25 after Federal Reserve (Fed) Chair Jerome Powell was charged by US federal prosecutors for mismanaging funds utilized in the renovation of Washington’s headquarters.
• In response, Fed Chair Powell has stated that he “carried out my duties without political fear or favor and will continue to do so”, and the “new threat is not about his testimony or the renovation project but a pretext”. Powell clarified that criminal charges against him are a “consequence of the Fed setting interest rates based on its assessment of the public interest rather than the president's preferences”.
• Renewed tussle between US President Trump and Fed’s Powell prompted concerns over the central bank’s independence and credibility of US assets. Analysts at Fitch Ratings have stated that the Fed’s independence has been a key factor for a strong US credit rating, and an attack on the same could hit the sovereign rating.
• On the economic front, investors await the US Consumer Price Index (CPI) data for December, which will be published at 13:30 GMT. The US core inflation – which excludes volatile food and energy items – is expected to have risen at a faster pace to 2.7% YoY from 2.6% in November, with headline figures growing steadily by 2.7%.
• In 2025, the Fed reduced interest rates by 75 basis points (bps) to 3.50%-3.75% to support weakening job conditions, while inflation remained well above the 2% target. As the Fed has loosened monetary conditions to contain employment risks, it is expected to shift its focus to bring inflation under control.
• In India, the retail CPI data for December came in at 1.33% Year-on-year (YoY), higher than the prior reading of 0.71%, but lower than estimates of 1.5%. Though inflation in India has accelerated, it is still below the Reserve Bank of India’s tolerance band of 2%-6%, a scenario that could boost hopes of more interest rate cuts in the near term. In 2025, the RBI cut its Repo Rate by 125 basis points (bps) to 5.25% to contain inflation risks.

Technical Analysis: USD/INR holds key 20-day EMA

USD/INR trades higher at around 90.50 as of writing. Price holds above the 20-day Exponential Moving Average (EMA), which edges higher at 90.27, maintaining a mild bullish bias. The ascending 20-day EMA supports dips, and a break below it would temper the advance.

The 14-day Relative Strength Index (RSI) at 55.75 sits in neutral territory with a slight positive tilt, after easing from prior overbought readings earlier in the sequence.

Momentum remains steady, and continued traction above the 20-day EMA at 90.27 could keep upside risks in play, while a daily close beneath that gauge would point to range-building instead.

(The technical analysis of this story was written with the help of an AI tool.)