Forex News

• The Indian Rupee rallies against the US Dollar, following the trade deal announcement by the US and India.
• The US slashes tariffs on India to 18% in exchange for zero import duty on goods from Washington.
• Investors await the RBI’s monetary policy and the US NFP data for January.

The Indian Rupee (INR) gains sharply against the US Dollar (USD) on Tuesday, following the confirmation of a long-awaited trade deal between the United States (US) and India the previous day. The USD/INR pair opens with a gap down to near 90.35, the lowest level seen in almost three weeks.

On Monday, US President Donald Trump confirmed a bilateral trade pact with India in which Washington slashed tariffs on imports from New Delhi to 18% from 50%, which is lower than or equal to most economies in South Asia and the Association of South-East Asian Nations (ASEAN). This scenario will be favorable for Indian exporters to get a competitive edge over their competitors in other Asian nations.

In exchange, the Indian economy agreed to reduce tariffs on imports from Washington to zero, no oil purchase from Russia, and commit to buying several American goods, including energy, agriculture, coal, and technology, worth $500 billion.

The US-India trade deal euphoria has resulted in a significant upside move in the Indian stock market. The Nifty50 opens almost 3.5% higher to near 26,330, led by a strong jump in technology, gems and jewelry, textile, and capital market stocks.

Daily Digest Market Movers: US Dollar edges down amid partial federal shutdown

• The US Dollar ticks lower after a strong upside move in the last two trading days, with investors shifting focus to an array of US economic data releases this week.
• As of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades 0.2% lower to near 97.45.
• The US Dollar has retraced slightly due to the partial US federal shutdown, which will suspend key economic data releases.
• On Monday, the US ISM Manufacturing PMI report for January showed that the manufacturing sector activity returned to growth after declining for several months. The Manufacturing PMI came in at 52.6, higher than estimates of 48.5 and the prior release of 47.9. A figure above 50.00 is seen as an expansion in the business activity.
• The US Dollar has been outperforming since Friday after US President Donald Trump nominated former Governor Kevin Warsh for the Fed’s new Chairman. Investors expected Warsh to avoid rapid interest rate cuts, given his historic preference for a firmer US Dollar in his previous tenure at the Fed.
• This week, the major trigger for the Indian Rupee will be the monetary policy announcement by the Reserve Bank of India (RBI) on Friday.

Technical Analysis: USD/INR sees more downside towards 89.50

USD/INR trades sharply lower to near 90.35 as of writing. The price slides below the 20-day Exponential Moving Average (EMA) at 91.0816, keeping the near-term bias soft. The 20-day EMA has started to roll over, reinforcing a corrective tone. Rallies could be capped at the EMA.

The 14-day Relative Strength Index (RSI) at 43.17 is below the 50 midline, confirming waning momentum.

Unless USD/INR reclaims the 20-day EMA on a closing basis, the risk stays skewed toward further range compression or downside probes. Looking down, the pair could find support near the December 19 low of 89.50

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

• NZD/USD appreciates as the US Dollar pares its recent gains from the previous two sessions.
• The New Zealand Dollar strengthened on expectations that the RBNZ will start raising interest rates later this year.
• The Greenback may regain ground as 10-year Treasury yields hover near 4.27% after a sharp prior rise.

NZD/USD recovers losses registered in the previous two consecutive sessions, trading around 0.6050 during the European hours on Tuesday. The pair rebounds as the US Dollar (USD) struggles after two days of gains.

However, the upside of the NZD/USD pair could be limited as the US Dollar may regain its ground, receiving support as the yield on the 10-year US Treasury bond hovered near 4.27% on Tuesday after a nearly 1% rise in the prior session, underpinned by strong US economic data and shifting Federal Reserve (Fed) policy expectations toward hawkish.

Monday’s release showed an unexpected rebound in US factory activity, underscoring economic resilience, as the Institute for Supply Management's (ISM) Manufacturing Purchasing Managers' Index (PMI) rose to 52.6 from 47.9 in December, beating market expectations of 48.5.

The NZD/USD pair remains stronger despite Stats NZ data showing seasonally adjusted Building Permits fell 4.6% month-over-month (MoM) in December 2025, reversing a downwardly revised 2.7% rise in November.

The New Zealand Dollar (NZD) strengthened against the US Dollar (USD) on expectations that the Reserve Bank of New Zealand (RBNZ) will begin raising interest rates later this year. The central bank’s first policy meeting is scheduled on February 18 under new RBNZ Governor Anna Breman, who is likely to outline her policy direction.

Traders await labor market data due on Wednesday, with the Q4 Unemployment Rate seen holding at 5.3%, the highest since 2016, while Employment is expected to increase 0.3%.

Sentiment was also supported by upbeat data from China, New Zealand’s largest trading partner, after a private survey showed mainland manufacturing expanded at its fastest pace in three months. China’s RatingDog Manufacturing Purchasing Managers' Index (PMI) edged up to 50.3 in January from 50.1 in December, matching expectations and marking the strongest expansion since October.

Deutsche Bank's Macro Strategy report highlights a positive outlook for the Dollar following strong economic data. The report notes that the ISM manufacturing index unexpectedly surged, contributing to rising optimism for 2026. The Dollar Index increased by 0.66%, marking its best two-day performance since last spring.

Dollar strengthens on positive economic signals

"One of the clearest reactions to the ISM was in US Treasury markets, with yields moving higher as investors priced out the chance of Fed rate cuts. For instance, futures had been pricing in an 87% chance of another rate cut by the June FOMC (which would be Warsh’s first as Chair if confirmed), but that was down to 70% by the close."

"Higher yields supported the dollar index (+0.66%), which has had its best two-day run since last spring."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

The Reserve Bank of Australia (RBA) raised the target cash rate by 25bps to 3.85% in a unanimous decision, citing risks to inflation from excess demand and capacity constraints. The RBA's core inflation forecast was increased from 2.7% to 3.2% for 2026, indicating the likelihood of further action. The AUD is expected to trade between 69-71 cents in the near term, note Prashant Newnaha and Alex Loo from TD Securities.

RBA's hawkish stance on inflation

"The Bank raising its core inflation forecast from 2.7% to 3.2% for 2026 even with the Bank assuming a 4.20% cash rate for this year implies another hike is likely."

"On the domestic side, if growth in demand is stronger than expected, and growth in the economy’s supply capacity remains limited, it is likely to add further to capacity pressures."

"The fact that the RBA raised its core inflation forecast from 2.7% to 3.2% for 2026 suggests the RBA sees capacity constraints as an ongoing issue."

"For now, we don't expect the RBA to hike before its next SoMP meeting and therefore stick with the RBA's next hike to be delivered in May to 4.10%."

"We expect AUD to trade in the 69-71 cents range in the near-term, with a bias to buy the dip."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)