Key Moments
- USD/INR trades near 95.95, close to its all-time high, as the Rupee faces strong selling pressure.
- India lifts import duties on Gold and Silver to 15% from 6%, raising market concerns about forex reserve adequacy.
- Petrol and diesel prices rise by Rs. 3 per liter, while WTI Oil has climbed almost 70% to $98 so far this year.
Rupee Weakens as Markets Focus on Forex Reserve Outlook
The Indian Rupee (INR) trades near its historic low against the US Dollar (USD) in early Friday dealings, with the USD/INR pair advancing toward 95.95. The currency faces heavy selling interest amid heightened worries about the state of India’s foreign exchange reserves following the central government’s latest move on precious metal imports.
Gold and Silver Duty Hike Sparks Reserve Concerns
Early Wednesday, the Indian government raised import tariffs on Gold and Silver to 15% from 6%. The stated intention of this decision is to curb demand for precious metals among the general public and thereby reduce pressure on the country’s foreign exchange reserves.
Over the weekend, Prime Minister Narendra Modi called on citizens to delay non-essential gold purchases for a year. Citing data reported by the Economic Times (ET), the article notes that Gold accounts for more than 9% of India’s total imports. India’s imports in 2025-26 was USD 775 billion.
Despite the policy rationale, the market reaction suggests that the duty hike has unsettled investors, fueling doubts about whether the government holds sufficient forex reserves to continue meeting its external payment obligations for imported goods.
| Measure / Data Point | Previous Level | New / Reported Level |
|---|---|---|
| Gold & Silver import duty | 6% | 15% |
| Share of Gold in total imports | > 9% | |
| Total imports (2025-26) | USD 775 billion | |
Fuel Price Hike and Elevated Crude Add to Pressure
Earlier Friday, the government also increased domestic fuel prices, lifting petrol and diesel rates by Rs. 3 per liter. The step is intended to partially offset the impact of sharply higher crude benchmarks.
According to the article, WTI Oil prices have risen nearly 70% so far this year to $98. They are expected to remain high as the Strait of Hormuz – a maritime route critical to nearly 20% of the world’s energy supply – stays closed amid ongoing tensions between Iran and the United States (US).
These elevated energy costs have weighed heavily on the Rupee over recent months. Currencies from economies that depend significantly on imported oil for their energy needs, such as India, tend to lag their peers in high oil price environments.
Foreign Flows Show Tentative Turnaround
Foreign Institutional Investors (FIIs) turned net buyers in Indian equities on Thursday after being net sellers for the previous seven consecutive sessions. However, the magnitude of inflows remains modest: FIIs deployed Rs. 187.46 crore, compared with an average outflow of Rs. 4,144.01 crore over the prior seven days.
This small improvement in foreign investor sentiment appears to be linked to expectations that the Indian government and the Reserve Bank of India (RBI) may roll out measures to bolster capital inflows. Citing an Indian Express report, the article notes that the Centre and the RBI are evaluating a new package of steps to attract foreign capital, which could include a reduction in the withholding tax on government bonds from the current 20%.
| FII Activity | Amount (Rs. crore) |
|---|---|
| Net buying on Thursday | 187.46 |
| Average net selling over previous 7 sessions | 4,144.01 |
| Current withholding tax on government bonds | 20% |
US Dollar Strengthens on Trade and Fed Expectations
External dynamics are also working against the Rupee. The US Dollar is outperforming major counterparts, with the US Dollar Index (DXY) revisiting an over two-week high at 99.10. This broader Dollar strength is providing additional upward momentum to USD/INR.
The Greenback is drawing support from signs of an improvement in US-China trade relations following the meeting between President Donald Trump and Chinese leader Xi Jinping. At the same time, strong expectations that the Federal Reserve (Fed) will either leave rates unchanged at current levels or raise them later this year to address elevated inflation are lending further support to the Dollar.
USD/INR Technical Picture: Trend Remains Bullish
From a technical standpoint, USD/INR is trading firmly around 95.95 at the time of writing, extending its move above the 20-period Exponential Moving Average (EMA) at 94.7912. This keeps the short-term technical bias clearly tilted to the upside.
The rising 20-period EMA continues to confirm the uptrend structure. The 14-period Relative Strength Index (RSI) stands at 67.36, which leans toward overbought territory but has not yet indicated clear signs of buyer exhaustion, suggesting that bullish momentum remains in place for now.
On the downside, the 20-period EMA at 94.79 is seen as the first line of support. A sustained break below this level would likely point to a corrective pullback following the recent sharp advance. On the upside, if the pair can establish a foothold above 96.00, the move could potentially extend toward the 97.00 area.
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