USD/INR refreshes monthly high as oil prices spike amid US-Iran war
- The Indian Rupee falls sharply to near 91.75 against the US Dollar amid the US-Iran war.
- Middle East tensions have spiked the oil prices and triggered risk-off market sentiment.
- India’s Q4 GDP registers a strong 7.8% growth against estimates of 7.2%.
The Indian Rupee (INR) starts the week on a negative note against the US Dollar (USD), with the USD/INR pair rising 0.25% to near 91.75 amid sour market sentiment and surging oil prices due to a brutal war between the United States (US) and Iran.
S&P 500 futures trade sharply lower, and Asian stock markets plunge in the Asian trade on Monday, demonstrating a risk-off market sentiment.
The oil prices soar following reports of two attacks on tankers in or near the Strait of Hormuz amid the US-Iran war. WTI futures on the NYMEX are up over 4% to near $70, the highest level seen in over seven months. Currencies from countries like India that rely heavily on oil imports to meet their energy needs remain highly sensitive to changes in the oil prices.
Over the weekend, Israel and the US military launched a series of strikes against Iran in which their 48 leaders, including top leader Ayatollah Ali Khamenei, were killed, according to Fox News.
In response, Iran’s Islamic Revolutionary Guard Corps (IRGC) retaliated with missile and drone attacks against Israel and US military bases across the Middle East and several West Asian countries.
Meanwhile, Tehran has announced Ayatollah Alireza Arafi as its interim leader after the killing of Supreme Leader Ayatollah Ali Khamenei.
On the domestic front, India’s Q4 Gross Domestic Product (GDP) data has surprised markets after registering a 7.8% Year-on-Year (YoY) growth, faster than estimates of 7.2%, but slower than 8.2% in the third quarter of 2025.
After strong Q4 numbers, India’s Chief Economic Adviser V Anantha Nageswaran has revised GDP growth for the entire Financial Year (FY) 2026-27 to 7%-7.4% from the 6.8%-7.2% projected last month.
During the Asian trade, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades 0.23% higher to near 97.85 amid a risk-off mood. This week, the major trigger for the US Dollar will be the US Nonfarm Payrolls (NFP) data for February, which will be released on Friday.
Technical Analysis: USD/INR rises to near 91.75
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USD/INR jumps to near 91.75 in the opening trade on Monday, the highest level seen in a month. The pair demonstrates a mild bullish bias as price holds above the 20-day Exponential Moving Average, which is starting to edge higher again after a period of consolidation.
The 14-day Relative Strength Index (RSI) jumps vertically to 65.00 after consolidating in the 40.00-60.00 range for a month, hinting at the onset of a fresh bullish momentum.
As long as the pair stays above the 20-day EMA, the odds remain high that it could revisit the all-time high of 92.50. On the downside, the 20-day EMA around 91.05 forms first support, with a deeper pullback exposing the late-February trough at 90.60. A daily close below 90.60 would negate the current bullish bias and shift focus toward the 90.25 zone.
(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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