The Indian Rupee (INR) continued to weaken against the US Dollar (USD) on Wednesday, extending its losing streak into the third day of trading. The USD/INR pair jumps near 93.85 as the Indian currency underperforms, with oil prices accounting for the bulk of Tuesday’s gains despite the extension of a ceasefire between the United States (US) and Iran indefinitely.
At the time of writing, WTI oil prices are down 1% to nearly $88.70, after rising nearly 5% on Tuesday.
Currencies from economies like India that rely heavily on oil imports to meet their energy needs tend to perform worse in a high oil price environment.
Trump announces an extension of the ceasefire with Iran
Late Tuesday, US President Donald Trump announced in a post on Truth Social that he had extended the two-week ceasefire that was set to expire on April 22 at Pakistan’s request until Washington receives a unified proposal from Tehran. However, Trump made clear that the U.S. blockade of Iran’s seaports will remain intact, a move that is restricting Iran’s normal business and crippling its economy.
Meanwhile, Iran’s stance seems clear that it will not return to the table for another round of peace talks with the US unless Washington lifts the blockade.
The announcement of a ceasefire extension led to a broad risk rally; However, oil prices remain significantly higher as the Strait of Hormuz remains closed.
FIIs are again proving to be net sellers
Foreign investors remained net sellers in the Indian stock market for the second day of trading on Tuesday. On the first two trading days of the week, foreign institutional investors (FIIs) have their shares worth Rs 2,978.92 crore. The sale price is higher than the three-day purchase price of Rs 1,731.71 crore in April 15-17, indicating that interest from foreign investors in the Indian stock market appears to have entered a prolonged stalemate despite the US-Iran war.
Kevin Warsh officially becomes the new chairman of the Fed
On Tuesday, Kevin Warsh was officially announced as the new chairman of the Federal Reserve (Fed), succeeding Jerome Powell, who was repeatedly criticized by US President Trump for not aggressively cutting interest rates.
In testimony before the Senate Banking Committee, Chairman Kevin Warsh emphasized the need for fundamental policy reforms and expressed his preference for a “smaller balance sheet,” which would mean interest rates fall, inflation gets better and the economy gets stronger.
Technical analysis: USD/INR extends recovery near 93.85
USD/INR is trading higher at around 93.85 in opening trade on Wednesday. The price shows a constructive bullish bias as it continues above the 20-day exponential moving average (EMA) at 93.18. The short-term uptrend from last week’s lows is supported by this dynamic floor, while the Relative Strength Index (14) at around 56 suggests moderate positive momentum with no overbought conditions, suggesting that buyers are still in control in the near term.
On the other hand, immediate support is seen at the 20-day EMA near 93.18, where a break would jeopardize the current upswing and open the door for a deeper correction towards the January 28 high at 92.28. On the upside, the price could reclaim the all-time high above 95.00 if it makes a decisive break above the 94.00 level.
(The technical analysis of this story was written using an AI tool.)
Frequently asked questions about Indian Rupee
The Indian Rupee (INR) is one of the most sensitive currencies to external factors. The price of crude oil (the country relies heavily on imported oil), the value of the US dollar – most trade is conducted in USD – and the level of foreign investment all have an influence. Direct interventions by the Reserve Bank of India (RBI) in the foreign exchange markets to keep the exchange rate stable as well as the interest rate level set by the RBI are other important factors influencing the rupee.
The Reserve Bank of India (RBI) actively intervenes in the foreign exchange markets to maintain a stable exchange rate and thereby facilitate trading. Additionally, the RBI is trying to maintain the inflation rate at its target of 4% by adjusting interest rates. Higher interest rates usually strengthen the rupee. This is due to the role of “carry trades,” whereby investors borrow in countries with lower interest rates in order to invest their money in countries with relatively higher interest rates and profit from the difference.
The macroeconomic factors that affect the value of the rupee include inflation, interest rates, the economic growth rate (GDP), the balance of trade and foreign investment inflows. A higher growth rate can lead to more foreign investment and increase demand for the rupee. A less negative trade balance will ultimately lead to a stronger rupee. Higher interest rates, especially real interest rates (interest less inflation), also have a positive impact on the rupee. A risk-on environment can lead to greater inflows of foreign direct and indirect investments (FDI and FII), which also benefit the rupee.
Higher inflation, particularly when comparatively higher than India’s peers, generally has a negative impact on the currency as it reflects devaluation caused by oversupply. Inflation also increases export costs, resulting in more rupees being sold to buy foreign imports, which is rupee negative. At the same time, higher inflation usually causes the Reserve Bank of India (RBI) to increase interest rates, which can have a positive impact on the rupee due to increased demand from international investors. The opposite effect applies with lower inflation.
