The Indian rupee edged higher against the US dollar in early trading on Wednesday, supported by a decline in crude oil prices that helped ease import cost pressures for the oil-dependent economy. The USD/INR pair slipped to around 95.70 as oil prices failed to sustain a brief recovery, with WTI crude trading nearly 1.8% lower at approximately $90.80 per barrel.
Lower oil prices benefit major importers like India by reducing the cost of energy imports and improving trade balances. The move comes amid ongoing diplomatic efforts between the United States and Iran, which have kept energy markets on edge.
Oil Prices Under Pressure Amid US-Iran Negotiations
Crude oil prices retreated as traders weighed the potential for a diplomatic resolution between Washington and Tehran, despite renewed military tensions. Iran’s Islamic Revolutionary Guard Corps (IRGC) threatened retaliation after US strikes in southern Iran, which the US Central Command described as acts of self-defense. Iran’s Foreign Ministry condemned the strikes as a “gross violation” of the ceasefire.
Nevertheless, negotiations aimed at ending the broader Middle East conflict and reopening the Strait of Hormuz continued through mediators. The strait is a critical chokepoint for global energy supplies, handling about 20% of worldwide oil shipments. According to a report from Iran’s Fars agency, an Iranian official said Tuesday that unfreezing Iranian funds remains the final major hurdle in talks with the US, with Qatar mediating. There has been no official confirmation of progress.
US Secretary of State Marco Rubio stated earlier this week that the Strait of Hormuz must remain open “one way or the other,” while acknowledging that finalizing a deal with Iran could take several more days. For more context on how these developments are affecting currency markets, see our analysis on forex markets remaining cautious amid unconfirmed US-Iran MOU talks.
Foreign Investors Cautious on Indian Equities
Foreign institutional investors (FIIs) showed mixed participation in Indian equity markets, reflecting cautious sentiment amid global uncertainty. On Tuesday, overseas investors turned net sellers, offloading equities worth Rs 2,407.87 crore, after purchasing Rs 821.75 crore worth of equities on Monday. The inconsistent flows highlight investor wariness as geopolitical risks persist.
US Dollar Steady Ahead of Key Inflation Data
The US Dollar Index hovered near the 99.00 mark as traders awaited clarity on US-Iran talks and the upcoming release of the US Personal Consumption Expenditure (PCE) Price Index for April, due Thursday. The core PCE gauge, the Federal Reserve’s preferred inflation measure, is expected to rise 3.3% year-over-year in April, up from 3.2% in March, with a monthly increase of 0.3%. The data could influence expectations for future interest rate decisions. For a broader view of dollar movements, see our report on the Dollar Index slipping to 99.07 as markets eye JOLTS data and NFP report.
USD/INR Technical Outlook Remains Constructive
From a technical perspective, USD/INR maintained a constructive bullish structure despite trading marginally lower near 95.70. The pair remains above the 20-day exponential moving average (EMA) at 95.44, indicating that the broader upward momentum is intact. The upward slope of the EMA supports the recent rally, while the Relative Strength Index (RSI) near 56 reflects positive momentum without overbought conditions.
Immediate support lies near the 20-day EMA at 95.44. A break below this level could weaken short-term momentum and expose the pair to a deeper correction toward 95.00. On the upside, a move above the May 22 high near 96.37 could open the path toward a retest of the all-time high around 97.00. For additional perspective on how geopolitical developments are influencing currency markets, see our piece on the dollar retreating as Hormuz talks ease safe-haven demand.
This article is for informational purposes only and does not constitute financial advice.
