The Indian Rupee (INR) holds onto its 10-day losses against the US Dollar (USD) in the opening session on Tuesday. The USD/INR pair trades firmly at around 96.43, close to its all-time high of 96.62 posted on Monday, as elevated oil prices due to restricted energy flows through the Strait of Hormuz continue to weigh on the Indian currency.
During the press time, the WTI Oil price trades marginally higher at around $102.16, but is close to its over two-week high of $104.74 posted on Monday.
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.
In response to the pressure of higher crude oil prices, the Indian government has announced a hike in petrol and diesel prices by 87 and 91 paise per litre, marking the second hike in less than a week. On Friday, prices of petrol and diesel were hiked by Rs. 3/litre.
US-Iran close to reaching a deal
The oil price rally appears to have hit pause for a while as the latest comments from United States (US) President Donald Trump have signaled that a deal with Iran could be confirmed soon.
On late Monday, US President Trump said that he delayed planned strikes on Iran after a “very positive development” in talks and that there was “a very good chance” they could reach a deal, The Guardian reported. Trump also stated on Monday, in an interview with Fortune, “I can tell you one thing—they [Iran]’re dying to sign [a deal].” The same day, a spokesperson from the Iranian Foreign Ministry said, “Iran is focused on ending the war at this stage,” while confirming that negotiations through Pakistan are still going on.
FIIs increase stake in Indian stock market
Foreign Institutional Investors (FIIs) have remained net buyers in the Indian stock market over the last three trading days despite concerns over India Inc.’s earnings projections amid persistently elevated oil prices. On Monday, overseas investors poured investments worth Rs. 2.813.69 crore into the Indian stock market.
In the last three trading days, FIIs have cumulatively increased their stake worth Rs. 4,330.32 crore.
FOMC minutes keenly awaited
A higher US Dollar due to firm US Treasury yields, with traders pricing out the possibility of interest rate cuts by the Federal Reserve (Fed) this year, is also providing strength to the USD/INR pair.
During the press time, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, trades 0.15% higher to near 99.10. 10-year US Treasury yields are slightly down to near 4.60%, still close to their yearly high of 4.63% posted on Monday.
The CME FedWatch tool shows that the possibility of the Fed holding interest rates at their current levels by the year-end is 53%, while the rest favor at least one interest rate hike this year.
Meanwhile, investors await the Federal Open Market Committee (FOMC) minutes of the April policy meeting, which will be released on Wednesday.
Technical Analysis: USD/INR aims to extend upside towards 97.00
USD/INR trades firmly at around 96.45 as of writing. The pair extends its advance well above the 20-day exponential moving average (EMA) at 95.07, and preserves a clear bullish near-term bias.
The Relative Strength Index (RSI) at 70.13 is entering overbought territory, suggesting upside momentum is strong but increasingly stretched.
On the downside, immediate support is located at the 20-day EMA around 95.07, where buyers are likely to defend the prevailing uptrend on shallow pullbacks. A deeper correction below that dynamic floor would expose the recent breakout area closer to the mid-94s, although while price holds above the 20-day EMA, dips are likely to be viewed as corrective within the broader bullish structure. Looking up, the pair is broadly in uncharted territory, and an attempt to extend the advance toward 97.00 is more likely.
(The technical analysis of this story was written with the help of an AI tool.)
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates.
When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money.
When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions.
The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system.
It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
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