The Indian Rupee (INR) falls sharply against the US Dollar (USD) on Wednesday.
The USD/INR pair jumps to near 95.78 as oil prices extend recovery due to renewed hostilities in the Middle East region, and the continuous outflow of foreign funds from the Indian stock market.
At press time, the WTI Oil price trades 1.4% higher to near $93.00, the highest level seen in over a week. Oil prices started recovering from May 29, following the announcement of revisions by United States (US) President Donald Trump in the agreement provided to Iran for a permanent ceasefire.
Currencies from economies, such as India, which rely heavily on oil imports to meet their energy needs, tend to underperform in a high oil price environment.
Meanwhile, a report from Reuters has stated that the Indian central bank is likely selling US Dollars to limit the Indian Rupee’s losses.
Renewed US-Iran tensions boost oil prices
Late Tuesday, the US Central Command (CENTCOM) said that it had intercepted and defeated a series of Iranian missile and drone attacks targeting regional neighbors, including Kuwait and Bahrain, while also carrying out self-defense strikes on Iran’s Qeshm Island in the Strait of Hormuz, renewing fears of a war resumption in the Middle East.
This came at a time when US President Donald Trump announced, through a post on Truth Social earlier this week, that Israeli Prime Minister (PM) Benjamin Netanyahu won’t attack Lebanon, and there will be no strikes between them after several Iranian officials warned attacks on Lebanon are non-compliant with the ceasefire.
FIIs turned out net sellers on Tuesday
Renewed uncertainty over the US-Iran deal has prompted caution among overseas investors toward the Indian stock market. On Tuesday, Foreign Institutional Investors (FIIs) sold a significant amount of shares worth Rs. 8,362.92 crore. FIIs were also net sellers on the first day of June on Monday, in which they offloaded their stake worth Rs. 3,911.68 crore.
RBI’s monetary policy in focus
The three-day Reserve Bank of India (RBI) policy meeting has started, and it will announce the monetary policy on Friday. According to a PTI poll, 11 respondents expect the RBI to maintain the repo rate at current levels in the June policy review, while four foresee a 25-basis-point (bps) increase, The Times of India (ToI) reported.
Investors will pay close attention to RBI Governor Sanjay Malhotra’s comments on the economic and inflation outlook.
The same day, India’s Q1 Gross Domestic Product (GDP) data will also be published, which is expected to arrive lower at 7.2% from the previous reading of 7.8%.
Technical Analysis: USD/INR returns above 20-day EMA
USD/INR trades higher at around 95.77 on Wednesday. The near-term trend of the pair appears to be turning bullish as it has returned above the 20-day Exponential Moving Average (EMA), which is at 95.43. The positioning of price over this dynamic support suggests buyers retain control, while the Relative Strength Index (RSI) around 54.9 stays in neutral territory, hinting at steady rather than overheated upside momentum.
On the downside, initial support is defined by the 20-day EMA at 95.43, where a break could open the door to a deeper correction toward the May 29 low at 94.46, followed by the May 07 low at 94.03. Looking up, the pair could hope to reclaim the all-time high of 97.09 if it manages to extend its recovery above the June 2 high at 96.19.
(The technical analysis of this story was written with the help of an AI tool.)
