The Indian Rupee (INR) recovers against the US Dollar (USD) at open on Tuesday after a sharp decline the previous day. The USD/INR pair drops to near 95.35 as oil prices extend their decline, following comments from United States (US) President Donald Trump that a deal with Iran could be finalized in two or three days.
As of writing, the MCX Crude Oil contract expiring on June 18 is down 2.35% to near 8,500. 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.
Oil prices fall further as Trump sees Iran deal soon
Oil prices started retreating after a strong start on Monday, following confirmation from Iran that it will stop attacking Israeli territory. However, Iran’s armed forces warned of harsher attacks if Israel resumes attacks on Lebanon.
Iran agreed to a truce with Israel after United States (US) President Donald Trump urged both to stop attacking each other immediately.
During the day, oil prices fell further as US President Trump expressed confidence that Washington can reach a deal with Iran in two or three days and that the Strait of Hormuz will open immediately upon signing.
FIIs continue to lower their stake in Indian stock market
Overseas investors continue to lighten their stakes in the Indian stock market amid growing concerns over India Inc.’s earnings projections in the wake of higher energy prices. So far in June, Foreign Institutional Investors (FIIs) have remained net sellers on all trading days, and have offloaded their stake worth Rs. 36,370.14 crore. In May, FIIs also remained net sellers and sold their investments worth Rs. 55,963.33 crore.
US-India CPI data comes into spotlight
This week, major triggers for USD/INR will be the Consumer Price Index (CPI) data for May from both the US and India, which will be released on Wednesday and Friday, respectively. The US headline CPI is expected to arrive higher at 4.2% Year-on-Year (YoY) from 3.8% in April. In the same period, the US core CPI – which excludes volatile food and energy items – is seen higher at 2.9% from the previous reading of 2.8%.
Signs of US inflationary pressures accelerating further would prompt expectations of interest rate hikes by the Federal Reserve (Fed) this year.
Meanwhile, India’s CPI data for May is also expected to come in higher at 4% YoY from 3.48% in April.
Last week, the Reserve Bank of India (RBI) warned of upside inflation risks in the monetary policy announcement and stated that it would act if it become more persistent. “If inflation becomes generalized, persistent, and starts influencing inflation expectations, policy action may become necessary,” the RBI Governor Sanjay Malhotra said.
Technical Analysis: USD/INR sees more downside below 95.00
USD/INR trades slightly lower at around 95.35 at press time. The pair is essentially flat, trading close to the 20-day Exponential Moving Average (EMA) for almost two weeks. The Relative Strength Index (RSI) near 50.0 hovers just above the midline, hinting at balanced momentum with only a slight bullish tilt but no clear directional conviction.
On the downside, the pair could slide towards the May 07 low at 94.03 if it fails to hold the key support level of 95.00. Looking up, the pair could aim to revisit the all-time high above 97.00 if it manages to recover above the June 4 high at 96.30.
(The technical analysis of this story was written with the help of an AI tool.)
Economic Indicator
Consumer Price Index (YoY)
The India Consumer Price Index released by the Ministry of Statistics and Programme Implementation measures the average price change for all goods and services purchased by households for consumption purposes. CPI is the main indicator to measure inflation and changes in purchasing trends. A high reading is positive (or bullish) for the INR, while a low reading is negative (or bearish).
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