USD/INR rises further while US-Iran ceasefire extension fails to lift Rupee
- The Indian Rupee declines further against the US Dollar as oil prices rise.
- US President Trump extends a ceasefire for an indefinite period.
- FIIs remain net sellers in the last two trading days.
The Indian Rupee (INR) weakens further against the US Dollar (USD) on Wednesday, extending its losing streak for the third trading day. The USD/INR pair jumps to near 93.85 as the Indian currency underperforms, with oil prices holding the majority of Tuesday’s gains, despite the extension of a ceasefire between the United States (US) and Iran for an indefinite period.
As of writing, the WTI Oil price is down 1% to near $88.70 after surging almost 5% on Tuesday.
Currencies from economies, such as India, which rely heavily on oil imports to meet their energy needs, tend to underperform in a high oil price environment.
On Tuesday, the Indian currency faced sharp selling pressure after the Reserve Bank of India (RBI) withdrew some measures, such as restrictions on offering non-deliverable forwards (NDFs) to resident and non‑resident users, which were meant to support the domestic currency against one-sided depreciation moves.
Trump announces ceasefire extension with Iran
Late Tuesday, US President Donald Trump announced, through a post on Truth Social, that he has extended the two-week ceasefire, which was set to expire on April 22, upon the request of Pakistan, until Washington receives a unified proposal from Tehran. However, Trump clarified that the US blockade of Iranian sea ports will remain intact, a move that is restricting the usual business of Iran and crippling its economy.
Meanwhile, the stance from Iran seems clear that they won’t return to the table with the US for another round of peace talks unless Washington removes the blockade.
The announcement of a ceasefire extension resulted in a broad risk rally; however, oil prices remain significantly higher, as the Strait of Hormuz remains closed.
FIIs turn out net sellers again
Overseas investors remain net sellers in the Indian stock market for the second trading day on Tuesday. In the first two trading days of the week, Foreign Institutional Investors (FIIs) have offloaded their stake worth Rs. 2,978.92 crore. The selling amount is higher than the three-day buying of Rs. 1,731.71 crore in the April 15-17 period, which suggests that the interest of foreign investors toward the Indian stock market remains lackluster despite the US-Iran war appears to be shifted to a prolonged standoff.
Kevin Warsh expresses preference for a smaller balance sheet
On Tuesday, US President Trump nominated Kevin Warsh as the successor of the Federal Reserve (Fed) Chairman Jerome Powell highlighted the need for fundamental policy reforms in his testimony before the Senate Banking Committee. Warsh also expressed a preference for a “smaller balance sheet”, which would mean rates could go lower, inflation get better, economy become stronger.
Technical Analysis: USD/INR aims to revisit all-time high above 95.00
USD/INR trades higher at around 93.85 on Wednesday. The price holds a constructive bullish bias as it remains above the 20-day exponential moving average (EMA) at 93.18. The short-term uptrend from last week’s lows is supported by this dynamic floor, while the Relative Strength Index (14) around 56 suggests moderate positive momentum without overbought conditions, hinting that buyers still retain control in the near term.
On the downside, immediate support is seen at the 20-day EMA near 93.18, where a break would threaten the current upswing and open the door to a deeper correction toward the January 28 high at 92.28. Looking up, the price could reclaim the all-time highs above 95.00 if it manages a decisive break above the 94.00 level.
(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.