7 Factors That Impact NRI USD Investments in Volatility

Two NRIs in our WhatsApp community made identical USD investments in January 2025.

Same amount. Same GIFT City FD. Same bank.

By December, one was calm. The other was panicking.

The difference? The calm investor understood seven forces that move USD investments during global turbulence. The panicking one only tracked headline returns.

At Belong, we've watched this pattern repeat through every market shock since we started building tools for NRIs.

This guide breaks down the seven specific factors you should understand.

Concrete forces with real numbers from 2025-2026 that directly affect your GIFT City FDs, FCNR deposits and USD mutual funds.

1. The Fed's Rate Path Sets Your Baseline Return

Every USD fixed-income product traces its return to one source: the US Federal Reserve's interest rate. When the Fed moves, GIFT City FD rates follow within weeks.

The Fed cut rates three times in late 2025, bringing the federal funds rate to 3.50-3.75% (Source: Federal Reserve, Jan 2026).

At its January 2026 meeting, it held steady. Markets now expect only 1-2 more cuts in 2026 (Source: Advisor Perspectives, Jan 2026).

A major wildcard: Fed Chair Powell's term expires May 2026. Kevin Warsh, nominated as his replacement, was historically hawkish but recent signals suggest a more dovish stance (Source: J.P. Morgan Global Research, Feb 2026).

A new Chair could accelerate or freeze rate cuts.

What this means: if you're holding a GIFT City FD locked at 5%+ before the 2025 cuts, new depositors may not get that rate.

A laddering strategy across 1, 2 and 3-year tenures hedges both directions.

2. The Rupee's Slide Changes Your Relative Advantage

The Indian rupee depreciated 5.71% against the dollar in the current financial year through February 2026, settling around ₹90.64 per dollar (Source: Business Standard, Feb 13, 2026).

Foreign portfolio investors pulled out over ₹1.43 lakh crore from Indian equities in 2025.

Exchange rate swings don't change your GIFT City FD return. If it pays 5% in USD, you still earn 5% in USD.

The impact shows in comparison: your friend's 7% NRE FD in rupees, minus 5.71% depreciation, delivered roughly 1.3% in dollar terms.

Your 5% USD FD outperformed by nearly 4 percentage points.

For NRIs planning to return to India, rupee weakness is actually helpful. Your USD savings buy more rupees at conversion.

Track movements on our exchange rate monitor.

👉 Tip: The rupee has averaged 3-5% annual depreciation over three decades (Source: Kotak MF/Bloomberg, Dec 2025). Any rupee investment needs to beat this depreciation rate just to break even in dollar terms.

3. Trade Policy Now Moves Markets More Than Earnings

US tariffs on Indian exports hit 50% in 2025, the highest globally (Source: Kotak Mutual Fund, Dec 2025).

The Liberation Day shock in April triggered immediate market selloffs. Deloitte's 2026 outlook confirms trade barriers remain the top source of financial market volatility (Source: Deloitte Global Economic Outlook 2026).

For USD fixed-income holders, tariff shocks have a silver lining. They push US inflation higher, delay Fed rate cuts and keep deposit rates elevated.

They also strengthen the dollar as a safe haven, widening the USD/INR gap.

The risk sits with equity-linked products. GIFT City mutual funds invested in Indian equities drop when tariff fears trigger FPI selloffs.

The USD denomination doesn't protect against the underlying market falling. Understand what's inside your GIFT City mutual fund before assuming it's "safe because it's in dollars."

4. RBI's Dollar Defence Creates Hidden Currency Risk

The RBI deployed approximately $30 billion between June and October 2025 to defend the rupee (Source: SBI Research, Dec 2025).

In a single week in August, forex reserves dropped $9.3 billion (Source: AInvest, Aug 2025).

This creates artificial calm. The rupee looks stable on your banking app. But when intervention stops or reserves thin, the correction can be sharp. The rupee went from ₹84 to ₹90+ in barely a year.

If you hold NRE FDs or Indian mutual funds, RBI intervention masks how much currency risk you carry. Your GIFT City USD investments sit outside this entirely.

They never touch the rupee, so the RBI's dollar-defence doesn't affect your principal or interest.

👉 Tip: Watch India's forex reserves as a leading indicator. Current level: approximately $689 billion. When reserves drop below $650 billion consistently, the RBI's rupee defence weakens. That's when USD holdings become most valuable.

5. Oil Prices Hit UAE NRIs From Three Directions

Oil affects you as a UAE resident, as an India investor and as a USD holder simultaneously.

When oil falls, India benefits. Lower import costs shrink the current account deficit and support the rupee.

That reduces the relative edge of holding USD. When oil spikes, India's deficit widens, the rupee weakens and USD holdings look smarter.

For UAE residents, prolonged low oil prices can slow the local economy. Job security concerns rise. Having liquid GIFT City FDs that you can repatriate in days becomes a safety net.

Consider staggered maturities so you always have one deposit accessible. Compare GIFT City vs NRE/NRO structures for liquidity planning.

6. Global Risk Sentiment Separates FDs From Equity Funds

When global markets panic, money rushes to safety. US Treasuries, dollar deposits and gold see inflows.

Emerging markets like India see outflows. This flight-to-safety pattern directly benefits GIFT City FD holders.

But if your USD allocation includes GIFT City equity mutual funds, the picture reverses. The fund's NAV drops with the Indian market even though it's denominated in USD. The currency wrapper doesn't shield you from equity losses.

A simple rule: FDs are your anchor. Equity funds are your engine. During market crashes, the anchor holds while the engine stalls.

Build both into your portfolio, with the anchor covering 12-18 months of expenses. Compare FDs vs mutual funds to find your ideal split. Explore GIFT City AIFs only if you can ride short-term drawdowns.

👉 Tip: During the April 2025 tariff shock, GIFT City FD holders saw zero impact on their deposits while Indian equity markets fell sharply. That's the anchor at work. Don't expect the same protection from equity-linked GIFT City mutual funds.

7. The US-India Inflation Gap Decides Real Returns

This factor almost nobody discusses. US inflation runs around 2.5-3%. Indian inflation sits at 4-5%. That 2% gap quietly erodes the advantage of holding rupee investments.

Your 7% NRE FD minus 5% Indian inflation gives 2% real return. Your 5% GIFT City FD minus 2.5% US inflation gives 2.5% real return.

Before accounting for rupee depreciation or tax differences, the inflation-adjusted picture favours USD.

During volatile periods, inflation diverges further. Supply chain disruptions from tariffs push prices up in both countries at different speeds.

Track both inflation numbers, not just headline returns.

Your Next Step

Volatility rewards preparation, not reaction. Thousands of NRIs in our WhatsApp community track these seven forces together and share real-time observations during market shocks.

The Belong app gives you the tools. Compare FD rates across GIFT City banks, track Indian markets through GIFT Nifty, and explore GIFT City mutual funds that fit your risk tolerance. Know the forces. Then invest with clarity.

Disclaimer: For informational purposes only. Not financial, tax or legal advice. Consult qualified advisors before investing. Market conditions, rates and regulations subject to change. Data cited from published sources as of February 2026.