USD/INR flattens while firm Oil prices keep Indian Rupee on backfoot

The Indian Rupee turns flat after sliding to near 86.20 against the US Dollar.
Tehran threatens to close the Strait of Hormuz to disrupt the Oil supply chain.
Investors expect the Fed to leave interest rates steady on Wednesday.

The Indian Rupee (INR) surrenders early gains after posting a fresh two-month low near 86.20 against the US Dollar (USD) and flattens around 86.08 during European trading hours on Monday. The outlook of the USD/INR pair remains firm as demand for safe-haven assets has increased, such as the US Dollar (USD), following the conflict between Israel and Iran.

The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, edges up to near 98.30. Last week, the USD Index gained ground after posting a fresh three-year low near 97.60.

No signs of efforts towards ending the conflict by both nations have forced investors to shift to the safe-haven fleet. Israeli Defence Minister Israel Katz warned that “Tehran will burn” if Iran continues firing missiles at Israel, Euronews reported.

Meanwhile, officials from Iran have threatened to shut down the Strait of Hormuz, from which around one-fifth of the world’s oil is transported to global markets, a move that could potentially boost oil prices. “Closing the waterway is under consideration and Iran will make the best decision with determination,” Commander in the Islamic Revolutionary Guard Corps (IRGC) Sardar Esmail Kowsari said in an interview over the weekend, Arab News reported.

The scenario of rising Oil prices is unfavorable for the Indian Rupee, given that India is one of the leading Oil-importing nations in the world.

Indian Rupee PRICE Today

The table below shows the percentage change of Indian Rupee (INR) against listed major currencies today. Indian Rupee was the weakest against the Japanese Yen.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	INR
USD		-0.07%	-0.04%	-0.27%	0.00%	-0.18%	-0.11%	-0.04%
EUR	0.07%		-0.08%	-0.22%	0.08%	0.00%	-0.03%	-0.05%
GBP	0.04%	0.08%		-0.08%	0.17%	0.10%	0.05%	0.11%
JPY	0.27%	0.22%	0.08%		0.27%	-0.22%	-0.20%	0.13%
CAD	-0.01%	-0.08%	-0.17%	-0.27%		-0.12%	-0.11%	-0.13%
AUD	0.18%	-0.01%	-0.10%	0.22%	0.12%		-0.04%	-0.06%
NZD	0.11%	0.03%	-0.05%	0.20%	0.11%	0.04%		0.06%
INR	0.04%	0.05%	-0.11%	-0.13%	0.13%	0.06%	-0.06%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Indian Rupee from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent INR (base)/USD (quote).

Daily digest market movers: Indian Rupee is expected to remain on the backfoot

The major trigger for the US Dollar will be the Federal Reserve’s (Fed) monetary policy announcement on Wednesday, in which the United States (US) central bank is expected to leave interest rates steady in the current range of 4.25%-4.50%.
As the Fed is widely anticipated to keep borrowing rates on hold, investors will closely monitor the Fed’s dot plot, which shows where policymakers see interest rates heading in the near and long term.
Market expectations will pay close attention to whether officials remain firm in their March projection that the central bank will cut interest rates at least once this year amid heightened uncertainty over the economic outlook due to the imposition of new economic policies by US President Donald Trump.
Investors will also focus on Fed Chair Jerome Powell’s press conference for comments regarding the impact of rising crude oil prices on the inflation outlook. Theoretically, higher Oil Prices discourage the Fed from supporting interest rate cuts.
Ahead of the Fed’s monetary policy, investors will focus on the Retail Sales data for May, which will be released on Tuesday. The Retail Sales data, a key measure of consumer spending, is expected to have declined by 0.7% on month after a 0.1% growth in April.
Meanwhile, cooling inflationary pressures and consistent foreign outflows from the Indian market are factors responsible for Indian Rupee’s underperformance other than soaring Oil prices.
Last week, the data showed that year-on-year CPI rose by 2.82% on year, the lowest level seen in over six years, signaling the need for further interest rate cuts by the Reserve Bank of India (RBI). The inflation report showed that modest growth in food inflation was the major factor contributing to slower CPI growth.
In the Indian equity market, Foreign Institutional Investors (FIIs) have been net sellers in the last three trading sessions. FIIs have sold equities worth Rs. 4,812.39 crores this month till June 13, according to data from exchanges.

Technical Analysis: USD/INR posts fresh two-month high

The USD/INR pair jumps to near 86.23 on Monday, the highest level seen in two months. The pair strengthens after a strong recovery move from the 20-day Exponential Moving Average (EMA) ON June 12 around 85.45.

The 14-day Relative Strength Index (RSI) breaks above 60.00, suggesting that a fresh bullish momentum has been triggered.

Looking down, the 20-day EMA is a key support level for the major. On the upside, the May 23 high of 86.44 will be a critical hurdle for the pair.

Economic Indicator

Fed Interest Rate Decision

The Federal Reserve (Fed) deliberates on monetary policy and makes a decision on interest rates at eight pre-scheduled meetings per year. It has two mandates: to keep inflation at 2%, and to maintain full employment. Its main tool for achieving this is by setting interest rates – both at which it lends to banks and banks lend to each other. If it decides to hike rates, the US Dollar (USD) tends to strengthen as it attracts more foreign capital inflows. If it cuts rates, it tends to weaken the USD as capital drains out to countries offering higher returns. If rates are left unchanged, attention turns to the tone of the Federal Open Market Committee (FOMC) statement, and whether it is hawkish (expectant of higher future interest rates), or dovish (expectant of lower future rates).