Indian Rupee falls to an all-time low as USD/INR jumps amid rising oil prices and increased risk aversion

Indian Rupee Weakens Further Against US Dollar

The Indian Rupee (INR) continued its downward trend against the US Dollar (USD) for a fifth straight session, with the USD/INR pair hitting a new all-time high of 92.58 during Wednesday's Asian trading. Market participants anticipate that the Reserve Bank of India (RBI) may intervene by selling dollars to help limit further depreciation of the rupee.

Rising oil prices, largely influenced by ongoing conflict in the Middle East, have put additional strain on the INR. Since India relies on imports for more than 80% of its crude oil requirements, any increase in oil prices forces the country to spend more US dollars to meet its energy needs.

The rupee’s position remains vulnerable as geopolitical tensions fuel risk aversion, prompting foreign investors to withdraw funds from Indian equity markets. On Monday alone, overseas investors pulled out over $350 million from Indian stocks, further pressuring the currency.

The US Dollar Index (DXY), which tracks the dollar’s performance against a basket of six major currencies, has risen for a third consecutive day and was trading near 99.10 at the time of reporting. Investors are now turning their attention to the upcoming US ISM Services PMI, scheduled for release later in the North American session.

The US dollar has been buoyed by diminishing expectations of near-term interest rate cuts from the Federal Reserve. The yield on the US 10-year Treasury note remains steady around 4.06% after climbing for two sessions, reflecting persistent inflation worries.

Elevated energy costs have heightened inflationary pressures, leading markets to scale back expectations for immediate monetary easing. Most investors now believe the Federal Reserve will maintain current interest rates until at least the summer, despite calls from US President Donald Trump for lower rates.

President Trump also announced that the US Navy would provide insurance support for commercial ships operating in the Gulf, following disruptions caused by Iran in the Strait of Hormuz. He stated that US forces would escort vessels if necessary, after reports emerged of Iranian attacks on several ships, according to the BBC.

In related developments, Israel reportedly targeted a building where Iranian clerics were meeting to select a new Supreme Leader. President Trump cautioned that such escalations could result in a more hardline leadership in Iran, adding to the uncertainty surrounding the ongoing conflict.

USD/INR Technical Outlook: New Record Highs

At the time of writing, USD/INR remains at a record high of 92.58. Technical analysis of the daily chart reveals a strong upward trend, with the pair trading above the upper limit of its ascending channel pattern.

The short-term outlook remains positive, as USD/INR is well above the rising 50-day Exponential Moving Average (EMA) near 90.84. The nine-day EMA is also climbing and sits above the medium-term average, reinforcing the bullish momentum.

The Relative Strength Index (RSI) is currently around 74, indicating that the pair is in overbought territory. While this suggests robust buying interest, it may also signal that further gains could slow, rather than prompt an immediate reversal.

If USD/INR breaks above the 92.58 mark, it could move toward the psychological barrier at 93.00. On the other hand, a pullback could see the pair test initial support at the nine-day EMA near 91.62, followed by the lower boundary of the ascending channel around 91.50.

USD/INR: Daily Chart

(This technical analysis was prepared with assistance from an AI tool.)