USD/INR forecast as the Indian rupee crashes to a record low

The Indian rupee continued its crash today, March 12, reaching its lowest level on record. The USD/INR exchange rate jumped to a record high of 92.28, up by 10% from its lowest level in April last year. This trend may continue as the Iran war continues.

Indian rupee at risk as energy prices jump 

The Indian rupee continued its downtrend as efforts by the United States and its allies to lower energy prices backfired.

In a statement on Wednesday, the International Energy Agency (IEA) proposed releasing 400 million barrels of oil from the Strategic Reserves, a move intended to lower prices that have more than doubled.

The opposite happened as investors weighed the ongoing closure of the Strait of Hormuz and the potential destruction of crucial oil infrastructure in the Middle East. For example, Iraq announced that it would slow activity at a key terminal after tankers were attacked.

Most Gulf countries have reduced their oil output because the Strait of Hormuz is largely closed, and the US has warned that Iran had mined the Strait.

India is exposed to the ongoing crude oil prices because it is a net importer from the Middle East and other countries. 

Worse, the country caved to Trump, who pushed it to end discounted imports from Russia. While the US has waived those tariffs, India is now paying the full price from Russia. 

At the same time, there is a possibility that prices will continue rising in the coming months as Iran is under no pressure to end the war. The country believes that pushing oil to $200 a barrel will create a deterrent for future attacks by the United States and Israel.

What is clear is that the ongoing oil price surge will lead to inflation in the country, and possibly push the Reserve Bank of India (RBI) to intervene with an interest rate hike.

At the same time, the USD/INR exchange rate has jumped because of the ongoing US dollar surge. Data shows that the US Dollar Index (DXY) is nearing the important resistance level at $100 as its role as a safe-haven asset rises.

The dollar is also rising as the odds of a Federal Reserve interest rate cut fade. Polymarket data shows that most traders expect the Federal Reserve to cut interest rates once this year. Some analysts are questioning the need for a cut as the ongoing war will make inflation worse.

USD/INR technical analysis 

The weekly timeframe chart shows that the USD/INR has been in a strong uptrend in the past few months and is sitting near its all-time high. It has remained above all moving averages, a sign that the uptrend is continuing.

The pair’s Relative Strength Index (RSI) and the Percentage Price Oscillator (PPO) have continued rising in the past few months.

Therefore, the most likely scenario is where the pair continues rising, with traders targeting the key resistance level at 94. This rally will likely continue as long as the war continues.