Daijiworld Media Network - New Delhi
New Delhi, Jan 27: Global currency markets are experiencing sharp volatility as the US Dollar continues to slide against major currencies, while the Indian rupee has shown relative resilience. The softer dollar could potentially revive foreign institutional investor (FII) inflows into India, according to a report released on Tuesday.
The report by Emkay Wealth Management Limited attributed the recent turbulence in currency markets and the weakening of the dollar to expectations of further interest rate cuts by the US Federal Reserve, along with ongoing geopolitical developments. Market participants believe the Fed’s accommodative policy stance and signals of additional easing have exerted downward pressure on the greenback.
Against this backdrop, the Indian rupee appears to have stabilised around the ?90 mark against the US Dollar. The report noted intermittent two-way volatility but suggested that market expectations point towards near-term consolidation around current levels.
“India’s position as a net importer continues to exert pressure on the rupee from a trade standpoint. However, improving prospects for foreign investment inflows could provide some counterbalance,” Emkay Wealth Management said.
FIIs have remained net sellers in Indian equity markets for nearly 18 months, a trend that has resulted in more attractive valuations across several sectors. Analysts believe that deeper rate cuts in the US could compress dollar yields, making emerging markets such as India more appealing to global investors.
“A softer US Dollar, combined with the possibility of capital shifting towards emerging markets, presents both opportunities and risks,” said Parag Morey, Head of Sales at Emkay Wealth Management. “For India, sustained foreign inflows backed by stable macroeconomic fundamentals could help the rupee remain within its current trading range despite global uncertainty.”
The Dollar Index has declined by nearly 9 per cent to around 98.60 since early 2025, reflecting the broader weakening trend of the US currency.
Currency experts also pointed to growing investor scepticism about the dollar, fuelled by speculation over a potential change in leadership at the US Federal Reserve by mid-2026. Expectations that a new Fed Chair could align monetary policy more closely with executive priorities have reinforced assumptions of an extended period of low interest rates, further pressuring the dollar against major global currencies.
At the same time, the report cautioned that investors should adopt prudent hedging strategies. Disruptions to global shipping routes or oil supplies could trigger short-term spikes in crude prices and prompt temporary safe-haven flows back into the dollar, adding to near-term volatility.