USD/INR jumps after Iran pledges to respond to Trump’s 48-hour deadline

Indian Rupee Hits New Lows Amid Middle East Tensions

At the beginning of a week shortened by holidays, the Indian Rupee (INR) continues to weaken against the US Dollar (USD). Indian financial markets will be closed on Thursday in observance of Shri Ram Navami.

The USD/INR exchange rate has surged to a record high of 94.40, as the Rupee comes under pressure from intensifying unrest in the Middle East. This follows a statement from US President Donald Trump, who demanded via Truth Social that Iran reopen the Strait of Hormuz within 48 hours.

Escalation in the Strait of Hormuz

President Trump announced on Saturday that the United States would destroy Iran’s power infrastructure, beginning with its largest facility, if Iran fails to comply with the demand to reopen the Strait of Hormuz within the specified timeframe.

In response, Iran has threatened to keep the Strait closed indefinitely and has warned of potential attacks on energy, IT, and desalination infrastructure in the region belonging to the US and Israel, according to a report by The Politico.

The growing conflict in the Middle East has led investors to shy away from riskier assets, prompting a move toward safer investments. Asian equity markets have suffered significant losses due to the crisis, with the Nifty 50 index dropping nearly 2% to its lowest point in over eleven months, around 22,650.

Amid these developments, the US Dollar has edged higher, with the Dollar Index (DXY) climbing 0.15% to approximately 99.65. The currency remains strong as market participants anticipate the Federal Reserve will maintain its pause on interest rate hikes, especially as inflation expectations rise alongside energy prices.

Foreign Investors Reduce Exposure to Indian Equities

Foreign Institutional Investors (FIIs) have continued to withdraw from Indian stocks amid the ongoing Middle East conflict. Throughout March, FIIs have consistently been net sellers, divesting holdings worth Rs. 86,780.89 crore.

Concerns over rising oil prices and potential disruptions to energy supplies have led FIIs to remain cautious, fearing that Indian companies may report weaker earnings for the fourth quarter of FY 2025-26 than previously projected.

Adding to supply concerns, Saudi Aramco—the world’s largest oil exporter—has reduced crude shipments to Asian customers for a second consecutive month in April, following disruptions to trade routes caused by the US-Israeli conflict with Iran in the Strait of Hormuz.

Looking ahead, investors will be closely watching the release of preliminary Purchasing Managers’ Index (PMI) data for both India and the US, scheduled for Tuesday.

USD/INR Technical Outlook: Entering New Highs

The USD/INR pair opened Monday’s session above 94.40, signaling a strong bullish trend. The price remains well above the rising 20-day Exponential Moving Average, confirming the ongoing uptrend.

Recent trading sessions have shown little sign of a pullback, with momentum indicators such as the 14-day Relative Strength Index (RSI) at 81.56, suggesting continued buying interest and no immediate signs of reversal.

The pattern of higher highs and higher lows further supports the positive outlook, while the lack of upper rejection wicks indicates persistent demand during price dips.

• Key resistance is expected near 94.50, where short-term selling may occur, with the next target for buyers at 95.00 if the upward momentum continues.
• On the downside, immediate support is found around 94.00, with stronger support at 93.50. The 20-day EMA, currently near 92.60, serves as a critical level for maintaining the broader uptrend.

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