The Indian Rupee rose to about 86.10 against the US Dollar during European trading hours. The USD/INR pair fell as oil prices dropped, following a ceasefire announcement between Israel and Iran made by US President Donald Trump. Oil prices on the New York Mercantile Exchange decreased by over 15% from a high of $76.74. This is good news for countries like India, which depend significantly on oil imports.

Impact On Inflation And Trade

Lower oil prices help to reduce inflation and the current account deficit in India. The announcement of the ceasefire has also boosted Indian stock markets, with the Nifty50 and Sensex30 seeing sharp increases, although they both gave back half their gains by the end of the day. After Iran threatened to close the Strait of Hormuz, there was a notable sell-off in Indian stocks. However, Foreign Institutional Investors bought ₹5,591.77 crore worth of Indian equities on Monday. The table below displays the percentage changes in currencies, showing that the Rupee is strongest against the Canadian Dollar. The decline of the USD/INR pair is due to a weaker US Dollar, influenced by changes in the Federal Reserve’s monetary policy. Federal Reserve officials have raised concerns about the labor market, hinting at a potential interest rate cut. Fed members Michelle Bowman and Christopher Waller support reducing rates to tackle employment risks.

Technical Analysis And Market Sentiment

The USD/INR pair approached the 20-day Exponential Moving Average at about 86.10, with the Relative Strength Index indicating a bearish reversal. Key support and resistance levels are at 85.70 and 86.93, respectively. The US PCE Price Index, an important inflation indicator, will be released on June 27, 2025. The expected increase to 2.6% from 2.5% could impact the strength of the US Dollar and guide monetary policy. With the rupee gaining ground, especially reaching around 86.10 during the European session, it’s clear that favorable economic conditions are emerging. This increase correlates with a broader decline in the US dollar, particularly as crude oil prices fell due to geopolitical developments, such as the ceasefire announcement between Israel and Iran. This situation is advantageous for India. Brent and NYMEX oil prices have dropped over 15% since reaching their recent highs, easing one of India’s major external financial pressures. Since India spends a lot on oil imports, lower prices will reduce costs for consumers and wholesalers, alleviating inflation concerns for the central bank. Cheaper energy helps narrow the trade gap and supports the rupee. The stock markets reacted quickly to the dual effects of decreasing oil prices and improved geopolitical conditions. Both major indices, Nifty50 and Sensex30, rose sharply in early trading, although they lost some gains by the end. This decline was partly due to heightened tensions after Iran warned about the Strait of Hormuz. However, foreign investments remained strong, with net purchases of nearly ₹5,600 crore, showing confidence in the market even on a volatile day. Technical indicators support the rupee’s positive trend. The USD/INR pair has dropped towards the 20-day EMA at 86.10, and the Relative Strength Index reveals weakening bullish momentum for the dollar. Attention should now shift to support at 85.70 if the rupee continues to rise, and resistance around 86.93 may lead to selling pressure or temporary consolidation. In the US, there’s a noticeable shift in sentiment at the Federal Reserve. Policymakers like Bowman and Waller, who were previously cautious, now seem more open to cutting rates due to concerns about employment data showing signs of weakness. This creates a scenario more favorable for a weaker dollar, thereby supporting the rupee. The upcoming US PCE Price Index, set for June 27, will be significant. The forecasted rise to 2.6% from 2.5% isn’t alarming by itself, but any unexpected increase might temporarily strengthen the dollar based on interpretations of future monetary policy. However, with inflation under control and signs of weakening employment, the overall narrative favors lowering interest rates instead of raising them. It’s a complex situation but with clear opportunities ahead. Create your live VT Markets account and start trading now.

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