USD INR Trading: Complete Trading Strategy | Espresso

Complete Guide on USD INR Trading

Currency trading is an ongoing process that remains shut only from Friday night till Sunday night. Nevertheless, for beginners in forex trading, the 24-hour trading processes could be deceptive.

Published on 06 February 2023

The fundamental currencies are usually traded during market hours. This further implies that some specific currency sets will essentially have more volume during those specific trading sessions. So, the traders who depend upon the dollar sets will find more volume in the US trading hours.

USD INR Trading in the Forex Market

In the forex market, the trader needs to have one currency to sell another currency. Then, almost every single currency gets evaluated till the fourth decimal point. A Percentage in Point (PIP) is an increase in trade. The forex exchange is a global marketplace for trading different currencies. And because of its global reach, forex trading remains one of the biggest and most fluid markets worldwide.

Different currencies trade against each other as the exchange rates are set. For example, EUR (Euro) against USD (US Dollar).

Forex markets are like the share markets where stocks, options, and shares are traded. Here, the market members use foreign exchanges as support against the international currencies and the growing interest rate hazards for a diversified portfolio, amongst other reasons.

Currency trading is usually done in pairs. So, as a first-time trader in India, you can take up the combination of USD INR trading, EUR INR trading, JPY INR trading, or GBP INR trading (INR = Indian Rupee or ₹). Each of these pairs has two different currencies. One is the base currency, and the other one is the quotation currency. For instance, in the case of USD INR trading, INR is the quotation currency while USD is the base currency. So, the value of one USD is around ₹74.64*.

(*Prices are subject to fluctuation. Please check the prevailing exchange rates before trading.)

Learn More: Want to Learn how to trade

So, if you are going for USD INR trading, you can expect that the currency pair value will go up. Also, the price will include the bid price and the ask price.

What Impacts the INR-USD Prices in the Forex Market?

Usually, general economic events can impact the currency pair prices. Also, as it involves USD and INR, any major geographical events in either of the countries may cause movement in the prices.

Another very popular term related to currency trading that you may have come across is PIP. When the currency reference rates are decided by the RBI, the PIP quote is calculated till the 4th decimal point. So, even a tiny difference in this fourth decimal point can greatly affect currency prices. The currencies are quoted worldwide till this 4th decimal point. For USD INR trading, the PIP is fixed at a rate of 0.0025.

USD INR Trading in the Derivatives Market

Currency derivatives allow the trader to take a hedge against international currencies like the Euro, US Dollar, Pound, and the Japanese Yen. Nevertheless, as most of the country’s trading and commerce happens in USD, INR-USD trading is one of the most popular in the derivatives market. Therefore, you can take part in the currency derivatives market in India for trading in forex and for managing your basic exposure to foreign currency trading.

Here, a trader can trade in call options and put options on the USD-INR pairs. There is no delivery of the dollar, and the difference exchange takes place in INR. However, they are European in nature. This means the options could be either squared off during the monthly trading or could be exercised at the time of its expiration. If the Dollar strengthens against INR, the buyer of put options profits, whereas if the dollar weakens, the buyer of the put option gains.

In a USD INR futures contract, you can buy or sell a dollar at a predetermined price and set a delivery date in the future. The futures are settled in INR in cash.

How to Trade USD INR Options in the Currency Derivatives Market

When it comes to USD INR trading in the derivatives market, trading call and put options on the pair is allowed. Since there is no delivery of the dollar, the difference exchange takes place in INR. The style of trading can be called European in nature.

The option is usually squared off in the month or exercised after expiry. Sometimes the dollar becomes stronger than the rupee before expiry. In that case, call option buyers have an advantage with huge gains. Any individual who buys the put option will benefit from the weakening of the dollar and lose if the dollar loses its strength.

USD INR trading is also possible in a futures contract. The USD INR pair in a futures contract enables the trader to buy or sell the dollar at the current price. The delivery is made on a future date. All futures get settled in INR.

In the case of USD INR futures, $1000 is the minimum notional trading value. It roughly comes to Rs 64,000. It comes with 3 serial monthly options contracts along with a quarterly contract. Let us consider the USD INR option with a strike price of Rs 64.

At any point in time, you will have access to a total of 12 in-the-money option strikes and 12 out-of-the-money option strikes. If you are anticipating the USD INR pair to move up, you should buy a call option on the pair. If you are expecting the pair to move down, you should buy the put option on the pair.

If you are a trader who wishes to take positions in the USD INR pair, you should understand their difference from the equity markets. While buying the equities, you are betting on the equity price to go up.

By investing in the USD INR pair, you are betting on the value of the dollar to go up. In other words, you are anticipating the value of the rupee to go down.

Settlement of currency derivatives happens on the last working day of the month. All USD INR pairs, along with pairs with Euro, Pound, and Yen, are always settled in cash. 

Benefits of Opting for the USD INR Pair in the Currency Derivatives Market

All Indian residents can participate in USD INR trading even when there’s no underlying limit. The bid-ask spreads are quite low, which reduces the risk of liquidity. Moreover, since the pair is quite liquid, it becomes easy to get quotes both ways with minimal risk.

While the forward market mechanism is closed, the USD INR trading strategies are transparent. Therefore, individual traders with limited access to information and insights also prefer this. Traders can log into the trading terminal to see the top buy and sell quotes with volumes so that they can substantially minimize information asymmetry.

You are allowed to access the USD INR pair through your broker. Additionally, you can also directly access it from your online trading platform. Therefore, it is an extremely convenient and hassle-free way of trading.

USD INR Trading Strategies

One of the most widespread trading strategies used by regular traders is the price action strategy. It basically depends upon the bearish and bullish nature of the price action. Apart from this, there’s the trend trading strategy. It is when the traders depend upon the trend analyses. Also, here the currency price movements are identified prior to deciding an entry point.

Next comes counter-trend trading. Here, the trader can go against the trend of range trading where the currency price range is used for trading purposes.

Then there is breakout trading where traders can enter the market at a point when the prices are breaking out from an earlier trading range.

For a trader wishing to trade in positions, deep knowledge about the market and trading expertise is essential. Position trading makes use of chart analysis. It involves selling currencies with a low-interest rate and purchasing currencies with high-interest rates.

Know More: Trading Chart Analysis


As a beginner in forex investments, all of these may seem a little overwhelming. However, forex trading needs a lot of skills and knowledge of the forex market. Also, there needs to be an understanding of the world events impacting the forex prices.

Know More: Risk Management in Forex Trading Explained


Chandresh Khona
Team Espresso

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