Indian Rupee slumps to fresh all-time lows on renewed US-Iran tensions

The Indian Rupee (INR) slumps to a fresh all-time low against the US Dollar (USD) in the opening session on Tuesday. The USD/INR pair jumps to near 95.60 as renewed tensions between the United States (US) and Iran have prompted fears of a prolonged closure of the Strait of Hormuz, a critical passage for almost 20% of global energy supply.

The continuation of the Hormuz closure is favorable for the oil prices, a scenario that bodes poorly for currencies from economies, such as India, which rely heavily on oil imports to meet their energy needs. As of writing, the WTI Oil price trades flat, slightly below $96.00.

Military actions in Middle East will likely resume

US President Donald Trump clarified on Monday that the counterproposal delivered by Iran against the one-page peace proposal was a “stupid proposal” and lacked Tehran’s decision on pursuing its nuclear ambitions. Trump added, “Ceasefire is on life support.”

Meanwhile, a report from CNN has stated that US President Trump has grown increasingly frustrated with how the Iranians are handling talks to end the conflict, and some Trump aides say that he is now more seriously considering a resumption of major combat operations than he has in recent weeks. This has renewed fears of a resumption of massacres in the Middle East.

FIIs selling spree remains intact

Amidst uncertainty surrounding India Inc.’s earnings projections due to elevated oil prices, foreign investors continue to dump their stake in the Indian stock market. So far in May, Foreign Institutional Investors (FIIs) have remained net sellers in five of six trading days and have offloaded their stake worth Rs. 19,509.91 crore.

Investors await India-US CPI data for April

During the day, investors will pay close attention to the India-US Consumer Price Index (CPI) data for April. India’s CPI data, which will be published at 04:00 PM IST (10:30 GMT), is expected to arrive higher at 3.8% Year-on-Year (YoY) from 3.4% in March. The US headline inflation, at 12:30 GMT, is estimated to have accelerated to 3.7% from the previous reading of 3.3%.

The India-US CPI data will significantly influence market expectations for the Reserve Bank of India (RBI) and the Federal Reserve’s (Fed) monetary policy outlook.

Higher US Dollar ahead of Trump’s visit to China also strengthens USD/INR

An improvement in the safe-haven demand of the US Dollar in the wake of renewed US-Iran tensions has also strengthened the USD/INR pair. As of writing, the US Dollar Index (DXY) trades 0.25% higher to near 98.15.

This week, the major trigger for global markets will be the bilateral meeting between US President Trump and Chinese leader Xi Jinping during Trump’s visit from May 13-15. Both leaders are expected to discuss mainly the Middle East situation, Taiwan, Artificial Intelligence (AI), and rare-earth elements.

Technical Analysis: USD/INR hits all-time highs near 95.60

USD/INR trades higher at around 95.60, extending a bullish bias as price holds above the 20-day exponential moving average (EMA) at 94.4221. The pair is pressing fresh highs within the recent sequence of higher closes, while the Relative Strength Index (RSI) near 64 points to firm but not yet overbought upside momentum, suggesting dips may continue to attract buying interest as long as the exchange rate remains supported above the short-term EMA.

Looking up, the pair is in uncharted territory and will likely extend its advance toward 96.00. On the downside, the 20-day EMA at 94.42 will act as dynamic support; a daily close below that would lead to further correction toward 94.00.

(The technical analysis of this story was written with the help of an AI tool.)