The Indian Rupee traded almost flat against the US Dollar on Tuesday afternoon, with USD/INR hovering around 95.00 as oil-market swings clouded direction. WTI was down 1.25% to near $90 at the time of writing, yet it had rebounded by over 4.5% on Monday, a move that can weigh on oil-importing economies such as India. US–Iran negotiations were reported to have paused, while US President Donald Trump said he expected an agreement within the next week to extend the ceasefire and reopen the Strait of Hormuz, and later said exchanges of attacks between Israel and Lebanon had stopped.
Attention turns to Friday’s Reserve Bank of India decision, where the Repo Rate is widely seen holding at 5.25% alongside hawkish guidance. Foreign Institutional Investors were net sellers on the first day of June, offloading Rs. 3,911.68 crore in Indian equities. On the US data front, April JOLTS Job Openings are due at 14:00 GMT and are forecast at 6.82 million versus 6.866 million in March, informing Federal Reserve expectations. Technically, USD/INR sits below the 20-day EMA at 95.38, with the 14-day RSI near 49.5; resistance is seen around 95.39 and 95.67, while support levels include 94.46 and 94.00.
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Oil Prices and Geopolitical Uncertainty Cloud Rupee Outlook
We are watching the USD/INR pair trade flat around 95.00, caught between conflicting pressures. The outlook is murky because rising oil prices, a major negative for India, are being fueled by new doubts over a US-Iran deal. This uncertainty creates a tense waiting game for the currency.
The renewed spike in oil prices is a significant threat to the Rupee. Since India imports over 85% of its crude oil, higher prices directly widen the trade deficit and stoke inflation. With US-Iran negotiations halted and tensions rising over Lebanon, the risk of supply disruptions through critical chokepoints like the Strait of Hormuz, which handles about 20% of global oil consumption, is putting upward pressure on energy costs.
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RBI Policy Meeting, FII Flows, and Technical Strategies Shape USD/INR Trade
This Friday, all eyes will be on the Reserve Bank of India’s policy announcement. We expect the RBI to hold its repo rate steady at 5.25% but adopt a more hawkish tone to combat the inflationary threat from expensive oil. Any comments from Governor Sanjay Malhotra on managing currency volatility amidst the Middle East crisis will be crucial.
Adding to the pressure, Foreign Institutional Investors (FIIs) have started June as net sellers, offloading nearly Rs. 4,000 crore from Indian equities on the first day of the month. This continues a trend of foreign capital outflows seen during periods of global uncertainty, historically weakening the Rupee. This sustained selling signals nervousness about India’s economic outlook given the energy shock.
On the other side of the pair, we are monitoring US JOLTS Job Openings data due later today. The forecast of 6.82 million job vacancies, while slightly down, still points to a resilient US labor market. A strong jobs report could convince the Federal Reserve to keep interest rates higher for longer, strengthening the US Dollar.
Given this backdrop, we see the USD/INR pair stuck in a range, with technical analysis showing resistance near the 20-day EMA at 95.38 and support around 94.46. We should consider options strategies that profit from a potential spike in volatility, such as buying a straddle or a strangle. This would position us to benefit from a sharp move in either direction following the RBI meeting or any major geopolitical development.
