USD/INR drops at open, outlook remains firm amid higher oil prices, FIIs selling
- The Indian Rupee ticks up at open against the US Dollar; the outlook remains fragile.
- Higher oil prices and FIIs selling are expected to dampen the Indian Rupee’s recovery.
- The US NFP data will be the key trigger for the US Dollar in Friday's North American trade.
The Indian Rupee (INR) trades higher against the US Dollar (USD) in the opening trade on Friday. The USD/INR pair drops to near 92.00 as the Indian Rupee holds support provided by the Reserve Bank of India (RBI) on Thursday by intervening in the foreign exchange market against excessive one-way moves.
On Thursday, the RBI intervened to support the domestic currency after it posted a fresh all-time low against the US Dollar at 92.67 on Wednesday.
The outlook of the Indian Rupee remains grim as oil prices have increased further amid the war in the Middle East involving the United States (US), Israel, and Iran, and the continuous outflow of foreign funds from the Indian stock market.
During the press time, WTI oil price trades firmly near its fresh 18-month high above $80.00 posted on Thursday. The oil price has rallied significantly as heightened military activities near the Strait of Hormuz, as part of Iran’s retaliation against the US for killing their Supreme Leader Ayatollah Ali Khamenei, have choked the global supply.
Currencies from nations like India that rely heavily on oil imports to fulfill their energy needs remain highly sensitive to changes in oil prices.
Meanwhile, the Indian economy is unlikely to face any oil supply shortage as the US has allowed India to buy crude oil from Russia for a month amid the Iran conflict.
On the foreign investment front, Foreign Institutional Investors (FIIs) have remained net sellers in all three trading days of March, and have offloaded their stake worth Rs. 15,800.81 crore, according to data from NSE.
As of writing, the US Dollar (USD) trades with slight caution ahead of the US Nonfarm Payrolls (NFP) data for February, which will be published at 13:30 GMT. Investors will closely monitor the US NFP data to get meaningful cues on the current state of employment. The data will also have a significant impact on the US interest rate outlook.
The US NFP report is expected to show that the economy created 59K fresh jobs, significantly lower than the 130K in January. The Unemployment Rate is seen steady at 4.3%.
The speculation for the Federal Reserve (Fed) reducing interest rates in the July meeting has weakened, following the release of the upbeat ADP Employment data on Wednesday.
According to the CME FedWatch tool, the odds of the Fed holding interest rates steady in the July policy meeting have increased to 47.4% from 33.4% seen a week before.
Technical Analysis: USD/INR wobbles near 92.00
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USD/INR ticks down to near 92.00 as of writing. The pair maintains a bullish near-term bias as price holds above the rising 20-day Exponential Moving Average near 91.43, confirming a positive short-term trend structure after the recent breakout from the 91.25–91.30 area.
Momentum conditions back this view, with the 14-day Relative Strength Index (RSI) staying above 60.00, even after retracing from the overbought zone, suggesting ongoing buying pressure rather than a completed exhaustion phase.
Immediate support emerges at 91.40–91.45, defined by the 20-day EMA, with a deeper pullback exposing secondary support at 91.00. Below that, the prior reaction low near 90.60 acts as a more distant floor that would need to hold to preserve the broader upswing. On the upside, the key resistance level is the all-time high of 92.67, and a daily close above this level would open the way toward the 93.00 region as the next bullish target.
(The technical analysis of this story was written with the help of an AI tool.)
Indian Rupee FAQs
The Indian Rupee (INR) is one of the most sensitive currencies to external factors. The price of Crude Oil (the country is highly dependent on imported Oil), the value of the US Dollar – most trade is conducted in USD – and the level of foreign investment, are all influential. Direct intervention by the Reserve Bank of India (RBI) in FX markets to keep the exchange rate stable, as well as the level of interest rates set by the RBI, are further major influencing factors on the Rupee.
The Reserve Bank of India (RBI) actively intervenes in forex markets to maintain a stable exchange rate, to help facilitate trade. In addition, the RBI tries to maintain the inflation rate at its 4% target by adjusting interest rates. Higher interest rates usually strengthen the Rupee. This is due to the role of the ‘carry trade’ in which investors borrow in countries with lower interest rates so as to place their money in countries’ offering relatively higher interest rates and profit from the difference.
Macroeconomic factors that influence the value of the Rupee include inflation, interest rates, the economic growth rate (GDP), the balance of trade, and inflows from foreign investment. A higher growth rate can lead to more overseas investment, pushing up demand for the Rupee. A less negative balance of trade will eventually lead to a stronger Rupee. Higher interest rates, especially real rates (interest rates less inflation) are also positive for the Rupee. A risk-on environment can lead to greater inflows of Foreign Direct and Indirect Investment (FDI and FII), which also benefit the Rupee.
Higher inflation, particularly, if it is comparatively higher than India’s peers, is generally negative for the currency as it reflects devaluation through oversupply. Inflation also increases the cost of exports, leading to more Rupees being sold to purchase foreign imports, which is Rupee-negative. At the same time, higher inflation usually leads to the Reserve Bank of India (RBI) raising interest rates and this can be positive for the Rupee, due to increased demand from international investors. The opposite effect is true of lower inflation.
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