• USD/INR struggles for a firm near-term direction and remains confined in a trading range.
• India’s strong economic outlook underpins the INR and acts as a headwind for spot prices.
• The USD advances amid reduced December Fed rate cut bets and lends support to the pair.

The USD/INR pair extends its sideways consolidative price move through the Asian session on Monday and remains confined in a familiar range held over the past two weeks or so. Spot prices currently trade around the 88.75 region, down less than 0.10% for the day and well within striking distance of the all-time high, touched in September.

Moody’s Ratings projected last Thursday that India’s economy will grow at 7% in 2025 and 6.5% in the next year, supported by domestic and export diversification amid a neutral-to-easy monetary policy stance. This acts as a tailwind for the Indian Rupee (INR) and acts as a headwind for the USD/INR pair amid the Reserve Bank of India’s (RBI) frequent market interventions.

Meanwhile, traders have fully priced out the possibility of a rate cut by the RBI in December, though a record low inflation keep the door open for more policy easing by the Indian central bank. In contrast, several Federal Reserve (Fed) officials have recently signaled a preference towards keeping interest rates unchanged at the next FOMC monetary policy meeting in December.

According to the CME Group’s FedWatch Tool, the probability of a 25 basis-point (bps) rate cut next month stands at 45%, down from 50% last week. This assists the US Dollar (USD) to gain some positive traction at the start of a new week and acts as a tailwind for the USD/INR pair ahead of FOMC Minutes and the delayed US Nonfarm Payrolls (NFP) report later this week.

From a technical perspective, the recent range-bound price action might still be categorized as a bullish consolidation phase before the next leg up. That said, traders might still wait for a sustained strength and acceptance above the 89.00 round figure before positioning for the resumption of a well-established uptrend from sub-84.00 levels, or early May swing low.