Rupee Weakens as Oil Surge and Outflows Lift USD/INR

Key Moments

Oil Rally Weighs on INR

The Indian Rupee opened flat against the US Dollar at the beginning of the Reserve Bank of India’s monetary policy week, but subsequently lost ground as USD/INR moved up toward 92.85. The advance in the pair coincides with a renewed surge in crude prices, which is exerting pressure on the Rupee.

WTI crude oil prices climb to around $106 at the start of the week, marking their highest level in nearly four weeks. The move comes as oil markets respond to heightened geopolitical tensions, following fresh threats of strikes against Iranian infrastructure made by US President Donald Trump on Truth.Social if no agreement is reached before a stated deadline.

“Tuesday will be Power Plant Day and Bridge Day, all wrapped up in one, in Iran. There will be nothing like it!!! Open the Fuckin’ Strait, you crazy bastards, or you’ll be living in Hell – JUST WATCH! Praise be to Allah. President DONALD J. TRUMP”, Trump wrote over the weekend.

Currencies belonging to economies that depend heavily on imported crude to meet energy demand, including India, are particularly vulnerable when oil prices strengthen, and this sensitivity is evident in the latest INR performance.

Foreign Investor Selling Adds to Rupee Pressure

In addition to the oil-driven headwinds, sustained foreign portfolio selling continues to undermine the Indian Rupee. Over the first two trading sessions of April, Foreign Institutional Investors have sold Indian equities worth Rs. 18,262.28 crore. This extends the pattern seen in March, when FIIs were net sellers on every trading day.

Overseas investors have been reducing exposure amid the ongoing conflict in the Middle East, which has increased demand for perceived safe-haven assets such as the US Dollar. The combination of risk aversion and equity outflows has amplified the downside pressure on INR.

Focus Turns to RBI Decision and US Services Data

The upcoming monetary policy announcement from the Reserve Bank of India on Wednesday is set to be the key domestic event for markets this week. The central bank is widely expected to keep interest rates unchanged, with elevated oil prices contributing to higher consumer inflation expectations globally.

Market participants will scrutinize the RBI’s commentary on its policy stance for signals on whether policymakers are considering future rate hikes as a tool to counter persistent price pressures.

On Monday, attention will also be on US macroeconomic data, specifically the ISM Services Purchasing Managers’ Index for March, scheduled for release at 14:00 GMT. Economists project that the headline Services PMI will ease to 55.0 from 56.1 in February.

USD/INR Technical Setup: Short-Term Capped, Broader Uptrend Intact

USD/INR trades near 92.85 in early Monday dealings. From a near-term technical perspective, the pair remains constrained by the 20-day Exponential Moving Average, which is limiting recovery attempts and maintaining a short-term bearish bias.

However, the broader technical picture still favors the upside, as the chart continues to display a pattern of higher highs and higher lows.

The 14-day Relative Strength Index has slipped from bullish territory above 60.00 into the 40.00-60.00 band, indicating that momentum has cooled, but without negating the underlying bullish inclination.

On the downside, initial support is seen at the March 9 high of 91.90. A daily close below that level would expose the March 5 low at 91.35. On the upside, the first resistance level is aligned with the 20-day EMA around 93.00, followed by the April 2 peak at 93.66. A decisive break above that resistance zone would reinforce the bullish trend and increase the likelihood of a retest of the all-time high at 95.22.

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

Key USD/INR Technical Levels

ISM Services PMI: Profile and Market Relevance

The Institute for Supply Management’s Services Purchasing Managers Index is released monthly and serves as a leading gauge of business conditions in the US services industry, which constitutes the largest portion of the economy. The index is compiled from surveys of supply executives across the country, who report on changes relative to the previous month within their organizations.

Readings above 50 point to expansion in services activity and are generally interpreted as positive for the US Dollar, while readings below 50 indicate contraction and are typically seen as negative for the currency.

Upcoming ISM Services PMI Release

Traders closely follow the ISM Services PMI because it provides a timely snapshot of the health of the US service sector, historically a major contributor to GDP. A stronger-than-expected reading often supports the US Dollar against other currencies. Beyond the headline figure, investors also monitor the Employment Index and Prices Paid Index within the report for additional insight into labor market dynamics and inflation trends.