Rupee Weakens as Oil Rises and FOMC Minutes Loom

Key Moments

Oil-Sensitive Rupee Under Pressure

The Indian Rupee is trading weak against the US Dollar in early Tuesday dealings, extending the decline seen on Monday. The USD/INR pair is quoted firmly around 95.36 as markets respond to renewed geopolitical risks to energy flows.

Concerns have intensified after attacks on commercial tankers passing through the Strait of Hormuz, a key corridor for nearly 20% of global energy shipments. The resulting anxiety over potential disruptions in oil supply has lifted crude prices and weighed on currencies from oil-import-dependent economies such as India.

At the open, the MCX Crude Oil futures contract expiring on July 20 trades about 0.66% higher, hovering near 6,600. This rebound in oil is adding to downside pressure on the Rupee.

According to an Axios reporter, Iran fired at least two missiles at commercial ships passing through the Strait of Hormuz. Bloomberg reported that two vessels were struck and sustained significant damage, though no casualties were recorded.

FOMC Minutes in Focus for USD/INR Traders

Market attention is now turning to the upcoming release of the Federal Open Market Committee (FOMC) minutes from the June policy meeting, scheduled for Wednesday. Participants in the USD/INR market are expected to scrutinize the document to better understand why Federal Reserve officials refrained from offering explicit forward guidance on future policy moves.

In that meeting, the Fed opted to keep its benchmark interest rate unchanged within a range of 3.50%-3.75%. The accompanying dot plot indicated that nine of the 19 policymakers favored raising rates before the end of the year.

As reflected by the CME FedWatch tool, the probability that the Fed will deliver at least one interest rate hike by the September policy meeting stands at 55.2%. These expectations are likely to influence Dollar dynamics and, in turn, the USD/INR pair.

Foreign Investor Flows and Equity Sentiment

Foreign Institutional Investors remained net buyers in the Indian equity market for a second consecutive session on Monday, although the magnitude of inflows dropped sharply compared with Friday. FIIs bought Indian stocks worth Rs. 243.03 crore on Monday, a notable pullback from the Rs. 1,355.33 crore of net purchases recorded on Friday.

The stabilization of oil prices back near levels seen before the Middle East conflict appears to have bolstered sentiment among overseas investors toward Indian equities.

Looking ahead, foreign investors are expected to track corporate earnings closely to guide their allocation decisions. Within the Nifty 50 universe, Tata Consultancy Services (TCS) will be the first to report Q1FY27 results, scheduled for release on Thursday.

Technical Picture: USD/INR Maintains Bullish Bias

On the technical front, USD/INR is trading broadly flat near 95.36, but the near-term tone remains mildly constructive. The spot rate is holding above the 20-day exponential moving average (EMA), currently around 95.00, and continues to respect a prior breakout from a Descending Triangle pattern.

The Relative Strength Index is positioned near 54.8, indicating supportive momentum rather than overbought conditions. This setup points to a gradual recovery while the price remains anchored above the short-term EMA.

On the downside, initial support is seen at the 20-day EMA at 95.00, with a further cushion at the May 7 low of 94.03. On the upside, the pair is targeting a retest of its all-time high, located near 97.10.

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

FOMC Minutes: Event Overview and Trading Relevance

The Federal Open Market Committee, or FOMC, convenes eight times a year to evaluate economic and financial conditions, set the stance of monetary policy, and weigh risks to its long-term objectives of price stability and sustainable economic growth. The FOMC minutes are published by the Federal Reserve Board of Governors and serve as a key guide to the likely direction of US interest rate policy.

Minutes of the FOMC are typically released three weeks after the corresponding policy decision. Investors analyze the document for insights into the policy outlook and the distribution of views among voting members. A tone perceived as supportive for tighter policy is generally seen as positive for the US Dollar, while a more accommodative or cautious stance is treated as Dollar-negative.

The market reaction to the minutes can be delayed, as media outlets do not receive advance access to the document, unlike the FOMC’s policy statement, which can lead to a more staggered interpretation and price response.