I noticed that the Indian Rupee recovered well against the dollar at the beginning of that January week, breaking a three-day losing streak. The USD/INR pair fell toward 90.35 while the Dollar Index hit a three-week low around 98.86. In short, the INR benefited from reduced risk aversion in global markets.

What stood out was how much the US manufacturing data really weighed. December's PMI plummeted to 47.9 from 48.2 in November, disappointing forecasts. This further weakened the dollar's appeal as a safe haven. Meanwhile, trade tensions between Washington and Delhi continue to exert pressure. Trump had threatened additional tariffs on India regarding Russian oil, and foreign investors were still reducing their positions in Indian stocks, although Monday's outflows were more contained.

From a technical perspective, the pair remained above the 20-day moving average at 90.2305, which acted as a dynamic support. The 14-day RSI was at 55.20, indicating neutral momentum without overbought conditions. The INR could potentially recover toward 91.55 if the support held, otherwise it risked falling toward 89.50 if it broke below the moving average.

The Fed had already cut rates three times in 2025, bringing them to 3.50-3.75%, and UBS expected further cuts in July and October. Friday’s non-farm payroll report would be crucial for the dollar. Overall, the INR remained suspended between weak US economic data and bilateral trade uncertainties.