Indian Rupee resumes downside due to FIIs selling and Iran conflict

The Indian Rupee (INR) trades lower against the US Dollar (USD) in the opening trade on Tuesday. The USD/INR pair rebounds to near 92.90 after a correction on Monday as the Indian Rupee resumes its downside journey amid the continuous outflow of foreign funds from the Indian stock market.

The outflow of a significant chunk of investment by overseas investors from emerging economies, such as India, dampens sentiment for the domestic currency.

Consistent foreign outflows are hurting Indian Rupee

So far in March, Foreign Institutional Investors (FIIs) have remained net sellers on all trading days, and have offloaded their stake worth Rs. 66,248.74 crore, according to data from NSE. FIIs are trimming their investment amid fears that rising oil prices due to tensions in the Middle East, which involve the United States (US), Israel, and Iran, would be a key drag on Nifty50 earnings in the last quarter of the current fiscal year.

Also, an absence of signs of de-escalation in the Middle East war has weakened investors’ risk appetite, which in turn has increased the safe-haven appeal of the US Dollar.

Earlier in the day, Israel Defence Forces (IDF) announced through a post on X that it had launched a series of airstrikes on the Iranian regime’s infrastructure and Hezbollah’s infrastructure in Beirut.

Meanwhile, broader strength in the US Dollar is also strengthening the USD/INR pair. As of writing, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, trades marginally higher to near 100.00. On Monday, the DXY corrected sharply from its over nine-month high of 100.54 posted on Friday.

The outlook of the US Dollar remains firm as higher oil prices due to the closure of the Strait of Hormuz amid Iran conflicts have raised US inflation expectations, a scenario that discourages Federal Reserve (Fed) officials from easing monetary policy conditions.

Investors await Fed’s policy on Wednesday

According to the CME FedWatch tool, traders are confident that the Fed will not cut interest rates before the September policy meeting. Also, the odds of an interest rate cut in the September meeting are almost 50%.

For official cues on the US interest rate outlook, investors will focus on the Fed’s monetary policy announcement and Chair Jerome Powell’s press conference on Wednesday. Market participants will also pay close attention to the Fed’s dot plot, which shows where policymakers expect interest rates to be in the medium and long term.

Technical Analysis: USD/INR sees more upside above 93.00

USD/INR trades higher at around 92.90 as of writing. The near-term bias is bullish as price holds above the rising 20-day Exponential Moving Average (EMA) near 92.08 while printing a sequence of higher closes. Momentum remains positive with the 14-day Relative Strength Index (RSI) staying inside the 60.00-80.00 zone, which signals firm buying pressure rather than exhaustion at this stage.

Initial support emerges at 92.60, where the latest pullback stalled above the dynamic floor from the 20-day EMA. A break below this area would expose 92.10 as the next downside level, guarding a deeper retracement toward 91.70. On the topside, immediate resistance stands at 93.00, and a sustained move above this barrier would open the way toward the 93.50 region as the next upside objective.

(The technical analysis of this story was written with the help of an AI tool.)