Rupee Extends Gains as Softer Dollar Offsets Oil

Key Moments

Rupee Gains as Dollar Softens Despite Higher Oil

The Indian Rupee (INR) builds on Thursday’s recovery against the US Dollar (USD) in early trading on Friday. The USD/INR pair declines further toward 95.22 as the Greenback loses momentum, with markets hoping that any renewed conflict in the Middle East between the United States and Iran will not be prolonged. Elevated crude prices, however, could still weigh on the Indian currency.

At the time of writing, the US Dollar Index (DXY) – which measures the Dollar against a basket of six major peers – is down 0.3%, hovering near a three-week low around 100.60. This marks the third consecutive session of declines for the index on Friday.

US-Iran Tensions: Technical Talks Continue

According to The Times of Israel, a US official has indicated that technical discussions with Iran are still ongoing, even though President Donald Trump has stated that the Memorandum of Understanding (MoU) with Tehran is over.

CNBC reported that US President Trump said late Wednesday that Iran still wants a deal badly, but he does not know whether it will “honor the deal”.

The persistence of technical-level engagement between the US and Iran is seen as a sign of de-escalation, yet investors remain cautious given the backdrop of continued hostilities. Late Thursday, Iranian state media reported that US forces had hit several additional targets in coastal Iran.

Oil Prices Rebound on Supply Risk Concerns

Crude oil prices recover sharply on Friday following a steep pullback the day before. The WTI Crude Oil contract expiring on July 20 is trading more than 1.1% higher, near Rs. 6,930, as traders remain focused on the risk that Middle East tensions could disrupt broader energy supplies.

Currencies of major oil-importing nations, including India, typically come under pressure when global crude benchmarks stay elevated, as higher import bills can strain external balances.

Foreign Investors Turn Net Sellers

Foreign Institutional Investors (FIIs), who had been net buyers in Indian equities on all trading days from July 3-8, reversed course on Thursday. They became net sellers, divesting holdings worth Rs. 532.86 crore in the domestic stock market.

Looking ahead, market participants may face a more mixed stance from overseas investors toward Indian equities, as the first-quarter earnings season for the 2026-27 financial year gets underway. The reporting cycle has begun with quarterly results from Tata Consultancy Services (TCS) released on Thursday.

USD/INR Technical Picture: Scope for Further Pullback

USD/INR is trading lower around 95.222. The pair still maintains a slight bullish undertone as it remains above the 20-day exponential moving average (EMA), currently positioned at 95.11.

The Relative Strength Index (RSI) has been confined to the 40.00-60.00 range for an extended period and is showing fatigue following a breakout from a descending triangle pattern. This setup points to the potential for a corrective phase.

On the downside, immediate support is located at the 20-day EMA near 95.11. Below that, attention turns to the former descending trendline breakout area around 94.69, followed by the May 7 low at 94.03. On the upside, the original descending trendline anchor near 97.02 remains a key resistance zone. Only a sustained move above that level would signal scope for a more pronounced bullish extension in USD/INR.