Key Moments
- USD/INR retreats toward 95.50 after Monday’s sharp move as crude prices slide on reports of a ceasefire between Iran and Israel.
- Foreign Institutional Investors have been net sellers in Indian equities in both May and so far in June, unloading a combined Rs. 92,333.47 crore.
- May CPI releases in the US and India are expected to show higher inflation, with US headline CPI seen at 4.2% YoY and India’s at 4% YoY.
Oil-Linked Relief Rally Boosts the Rupee
The Indian Rupee (INR) opened stronger against the US Dollar (USD) on Tuesday, recovering part of the previous session’s sharp losses. The USD/INR pair moved lower toward 95.50 as crude prices fell in response to reports of a ceasefire between Israel and Iran following exchanges of attacks over the weekend.
As of writing, the MCX Crude Oil contract expiring on June 18 is lower by 1% and trading near 8,600. Currencies from oil-import-dependent economies, including India, tend to struggle when energy prices are elevated, making the latest pullback in crude a supportive factor for the Rupee.
Geopolitical Developments Drive Crude Price Pullback
Oil prices started to give back gains after a strong start on Monday, following confirmation from Iran that it will stop attacking Israeli territory. At the same time, Iran’s armed forces cautioned that it would launch harsher attacks if Israel resumes strikes on Lebanon.
Iran agreed to a truce with Israel after United States (US) President Donald Trump urged both sides to halt attacks immediately.
On late Monday, US President Trump expressed confidence that Washington can announce a total victory over Iran in the next two weeks and “oil prices will come tumbling down”.
Foreign Investors Continue to Pare Indian Equity Exposure
Foreign Institutional Investors (FIIs) have been consistently reducing exposure to Indian equities amid concerns about India Inc.’s earnings outlook in an environment of higher energy costs. So far in June, FIIs have remained net sellers on every trading day, cutting positions worth Rs. 36,370.14 crore. This follows a net selling stance in May, when FIIs divested Rs. 55,963.33 crore.
| Period | FII Net Flow (Rs. crore) |
|---|---|
| May | 55,963.33 (net selling) |
| June (so far) | 36,370.14 (net selling) |
US and India CPI Releases in Focus for USD/INR
This week, the key macro catalysts for USD/INR are the May Consumer Price Index (CPI) reports from both the US and India, scheduled for release on Wednesday and Friday, respectively.
The US headline CPI is expected to rise to 4.2% Year-on-Year (YoY) from 3.8% in April. Over the same period, US core CPI – which excludes volatile food and energy components – is projected to edge up to 2.9% from 2.8% previously.
Evidence of faster US inflation would likely reinforce expectations that the Federal Reserve (Fed) could raise interest rates this year.
India’s May CPI is also forecast to increase, with the yearly rate seen at 4% compared with 3.48% in April.
In its monetary policy announcement last week, the Reserve Bank of India (RBI) highlighted upside risks to inflation and signaled a readiness to respond if price pressures become more entrenched. “If inflation becomes generalized, persistent and starts influencing inflation expectations, policy action may become necessary,” the RBI Governor Sanjay Malhotra said.
USD/INR Technical Picture: Range-Bound Near 20-Day EMA
USD/INR is trading slightly lower around 95.50, remaining essentially range-bound and hovering near the 20-day Exponential Moving Average (EMA) for nearly two weeks. The Relative Strength Index (RSI) stands at 53.46, just above the neutral 50 level, indicating balanced momentum with only a mild bullish bias and no decisive trend signal.
On the downside, sustained trading below the key 95.00 support could open the door for a move toward the May 07 low at 94.03. On the upside, a recovery above the June 4 high at 96.30 could pave the way for a retest of the all-time high above 97.00.
(The technical analysis of this story was written with the help of an AI tool.)
Economic Indicator Focus: US CPI (YoY)
Inflation and deflation trends are tracked by periodically aggregating the prices of a representative basket of goods and services, summarized in the Consumer Price Index (CPI). The data is compiled monthly and released by the US Department of Labor Statistics. The Year-on-Year (YoY) CPI reading compares prices in the reference month with the same month a year earlier, serving as a key gauge of inflation and shifts in purchasing patterns.
Generally, a higher CPI reading is interpreted as bullish for the US Dollar (USD), while a lower reading tends to be seen as bearish.
| Indicator | Details |
|---|---|
| Next release | Wed Jun 10, 2026 12:30 |
| Frequency | Monthly |
| Consensus | 4.2% |
| Previous | 3.8% |
| Source | US Bureau of Labor Statistics |
Why CPI Matters for Markets
The US Federal Reserve (Fed) operates under a dual mandate of maintaining price stability and achieving maximum employment. Within this framework, inflation is intended to hover around 2% YoY. Since the global pandemic, this component of the Fed’s mandate has been under increasing strain, with price pressures rising amid supply-chain disruptions and bottlenecks and the Consumer Price Index (CPI) staying at elevated levels.
The Fed has already implemented measures to curb inflation and is expected to maintain a firm policy stance going forward, making each CPI release a closely watched event for traders and investors.
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