Two-week low for Indian Rupee as elevated oil prices sustain pressure

High oil prices drive further Indian Rupee losses against the US Dollar.
Following elections, a joint military operation against Iran is being prepared by the US and Iran.
3.75%-4.00% remained the Fed’s interest rate range on Wednesday.

USD/INR edges up towards 95.30 in Thursday’s opening session. The Indian Rupee (INR) returns to a two-week low against the US Dollar (USD), with persistently high oil prices weighing on the South Asian currency.

At the time of writing, the November 19 MCX Crude Oil contract has fallen 1.5% to around Rs. 9,650. Despite that decline, prices remain near the recent high of Rs. 9,828.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

When oil prices are high, currencies of economies heavily dependent on imported oil for their energy requirements, including India, typically lag.

Oil Holds High on Supply Risks

Fears of a further increase in energy supply risks continue to underpin elevated oil prices. Reports suggest Israel and the United States (US) are preparing new attacks on Iran following their respective elections.

According to strategists at Deutsche Bank, oil prices remain broadly higher following a Wall Street Journal (WSJ) report that United States (US) President Donald Trump’s administration had told Gulf states to prepare for a new operation against Iran after the midterms. Danske Bank’s research team identifies another source of geopolitical support: in his post-election address, Israeli Prime Minister (PM) Benjamin Netanyahu raised the possibility of “renewed joint action with President Trump against Iran”.

Energy supply worries are also being reinforced by persistent tensions between Saudi Arabia and the Iran-aligned Houthis. A military spokesperson for Yemen’s Iran-aligned Houthis said on Tuesday that the group had fired a ballistic missile towards the Ras Tanura oil refinery in eastern Saudi Arabia, the kingdom’s largest refinery, according to Reuters.

US Dollar Recovers Following Fed Decision

A modest US Dollar rebound following the Federal Reserve’s (Fed) monetary policy announcement provides additional support for USD/INR. At the time of writing, the US Dollar Index (DXY) is slightly higher at around 102.20. The index measures the Greenback against six major currencies.

Following Wednesday’s Fed decision, the USD Index slipped back towards 102.00, failing to build on its three-day run of gains.

As expected, the Fed maintained its 3.75%-4.00% interest rate range at the meeting and reaffirmed its commitment to achieving price stability. According to Fed Chairman Kevin Warsh, there would be only six monetary policy decisions starting in 2028.

USD/INR Technical Outlook

At 95.2875 on the daily chart, USD/INR remains below its 20-day Exponential Moving Average (EMA) of 95.3303, leaving the near-term outlook mildly bearish. Failure to regain this short-term EMA indicates that nearby dynamic resistance continues to constrain rallies. Meanwhile, a Relative Strength Index (RSI) reading around 47 signals neutral-to-soft momentum, rather than oversold conditions, restricting the potential for a sharp rebound.

The 20-day EMA at 95.3303 provides immediate resistance and the first obstacle to a recovery. A sustained move above it would reduce downside pressure and allow a broader consolidation phase. The current dataset offers no clear structural support levels. Traders may therefore watch the recent closing-low area just below 95.10 as an indicative zone where buying demand could return if selling pressure resumes.

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

Indian Rupee: Frequently Asked Questions

Which factors drive Indian Rupee movements?

External developments have a particularly strong influence on the Indian Rupee (INR). Key drivers include Crude Oil prices, given India’s heavy reliance on imported Oil, the US Dollar’s value, as most trade is settled in USD, and foreign investment levels. The Reserve Bank of India (RBI) also plays a major role through direct FX market intervention to stabilise the exchange rate and through the interest rates it sets.

How does Reserve Bank of India policy affect the Rupee?

To support trade, the Reserve Bank of India (RBI) intervenes actively in currency markets to keep the exchange rate stable. It also adjusts interest rates in an effort to maintain inflation at its 4% target. Rate increases generally support the Rupee through the ‘carry trade’: investors borrow in lower-interest-rate countries and invest the proceeds in countries offering relatively higher rates, earning the difference.

Which macroeconomic indicators shape the Indian Rupee’s value?

Inflation, interest rates, economic growth (GDP), the trade balance and foreign investment inflows all help determine the Rupee’s value. Faster growth can attract additional overseas investment and lift demand for the currency. A narrowing trade deficit will eventually strengthen the Rupee. Higher interest rates are also supportive, particularly higher real rates, which are interest rates minus inflation. Greater Foreign Direct and Indirect Investment (FDI and FII) inflows in a risk-on environment can likewise benefit the Rupee.

What does inflation mean for the Indian Rupee?

Inflation generally weighs on the Rupee, especially when it exceeds levels in India’s peer economies, because it reflects a loss of currency value through oversupply. By making exports more expensive, inflation also results in more Rupees being sold to pay for foreign imports, adding pressure on the currency. However, higher inflation typically prompts the Reserve Bank of India (RBI) to raise interest rates. This can support the Rupee by increasing demand from international investors. Lower inflation has the reverse effect.