Indian rupee declines as crude rebounds and dollar gains strength

The Indian Rupee failed to extend its three-day winning streak against the US Dollar on Friday as renewed geopolitical concerns and rising oil prices weighed heavily on investor sentiment.

The USD/INR pair rebounded sharply to near 94.56 after touching a two-week low of 94.03 in the previous session.

The Indian currency came under pressure after crude oil prices recovered sharply amid concerns over the sustainability of the temporary ceasefire between the United States and Iran.

The rebound in the US Dollar also added further pressure on the rupee.

Oil prices rebound after Iran accuses US of violating ceasefire

Oil prices remained volatile after Iran accused the US of breaching ceasefire terms.

At the time of writing, the Brent crude oil contract was at $101.10 per barrel, up 1.1%, while the price of WTI was at $95.60 per barrel, up 0.8%. 

The recovery in crude prices followed reports that Tehran condemned Washington for allegedly targeting an Iranian oil tanker and another vessel entering the Strait of Hormuz.

US President Donald Trump defended the strikes and stated that the ceasefire agreement remained intact.

The sharp rise in oil prices has revived concerns for oil-importing economies such as India, where higher crude costs could pressure inflation and corporate earnings.

Foreign investors continue selling Indian equities

The Indian currency also remained under pressure due to continued selling by Foreign Institutional Investors (FIIs) in domestic equity markets.

Despite a broader improvement in global risk sentiment, foreign investors continued reducing exposure to Indian stocks as elevated crude oil prices raised concerns over earnings expectations for Indian companies.

So far in March, FIIs have remained net sellers in three out of four trading sessions.

They have offloaded equities worth Rs. 6,961.75 crore during the period.

Persistent foreign outflows have added pressure on the Rupee and limited any meaningful recovery against the US Dollar.

Stronger US Dollar supports USD/INR recovery

A recovery in the US Dollar during Thursday’s North American session also supported the upside in USD/INR.

The US Dollar Index, which measures the Greenback against six major currencies, held onto gains near 98.2 at the time of writing.

The Dollar strengthened after concerns resurfaced over the durability of the US-Iran ceasefire agreement.

Investors are now focusing on the upcoming US Nonfarm Payrolls (NFP) data for April, scheduled for release at 12:30 GMT.

The labour market report is expected to provide fresh signals regarding the Federal Reserve’s monetary policy outlook.

According to the CME FedWatch tool, markets currently see a 74% probability that the Federal Reserve will keep interest rates unchanged by the end of the year.

Technical outlook remains positive for USD/INR

Technically, USD/INR continued to trade with a bullish bias as the pair remained above the 20-day exponential moving average (EMA) near 94.20.

At press time, the pair traded around 94.50 while consolidating close to recent highs.

The Relative Strength Index (RSI) hovered near 56, remaining in positive territory without entering overbought levels, indicating that upside momentum persists, although at a moderated pace.