Higher oil prices keep Indian Rupee under pressure as it slips to two-week low

• The Indian Rupee extends its losses against the US Dollar as high oil prices weigh on the currency.
• Following elections, the US and Iran are set to undertake a joint military operation against Iran.
• Interest rates were held at 3.75%-4.00% by the Fed on Wednesday.

Pressure from elevated oil prices pushes the Indian Rupee (INR) back to a two-week low against the US Dollar (USD) on Thursday. During the opening session, USD/INR edges up to around 95.30 as the South Asian currency remains under strain.

Despite a 1.5% decline to around Rs. 9,650 at the time of writing, the MCX Crude Oil contract expiring on November 19 remains close to its recent highs of Rs. 9,828.

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

Why are oil prices staying elevated?

Fears of a further increase in energy supply risks have kept oil prices high. Reports indicate that Israel and the United States (US) are readying fresh strikes on Iran following their respective elections.

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

Energy supply worries are also being intensified by continuing tensions between the Iran-aligned Houthis and Saudi Arabia. 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.

How is the Fed’s policy announcement supporting the US Dollar?

USD/INR is also drawing support from a modest rebound in the US Dollar following the Federal Reserve’s (Fed) monetary policy announcement. At the time of writing, the US Dollar Index (DXY) is marginally firmer at around 102.20. The index tracks the Greenback against six major currencies.

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

As anticipated, interest rates were kept within the 3.75%-4.00% range at the Fed’s policy meeting, while the central bank 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 Analysis: Can the Pair Reclaim Its 20-Day EMA?

Trading 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 move back above this short-term EMA indicates that nearby dynamic resistance continues to restrain rallies. Meanwhile, the Relative Strength Index (RSI) at around 47 signals neutral-to-soft momentum, rather than oversold conditions, leaving limited room for a sharp rebound.

Any recovery first faces resistance at the 20-day EMA of 95.3303. A sustained move above that threshold would reduce downward pressure and create room for a broader consolidation phase. The available dataset does not identify clear structural support levels. Traders may therefore watch the recent closing-low zone just below 95.10 as a potential area for demand to return should selling pick up again.

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