Rupee Steadies as Oil Volatility, Fed Outlook Weigh

Key Moments

INR Stable in Early Trade as Oil Risks Counter Calm FX Tone

The Indian Rupee (INR) started Friday’s session largely unchanged, trading around 95.40 per US Dollar (USD). The USD/INR pair is moving sideways, with market participants looking for clearer signals on the reopening of the Strait of Hormuz, a key route for nearly one-fifth of global energy shipments. The continued uncertainty around this corridor is helping keep oil prices elevated.

In early dealings, the MCX Crude Oil contract expiring on August 19 was down 0.85%, trading near Rs. 7,755. Crude has faced modest selling over the last two sessions after reaching a fresh weekly high of Rs. 8,075 on Tuesday. Even so, the reduced energy flows via the closed Strait of Hormuz and Bab al-Mandab Strait – which together account for close to 27% of global energy supply – could set the stage for another leg higher in oil prices.

Oil Rally Pauses, but Strategists Still See Tight Market

TD Securities highlighted that the recent cooling in crude has marked “easing near-term momentum” and has “also catalyzed modest selling in WTI crude on the day.” Despite this, the bank’s commodity team “continue to highlight that fundamental tightness across crude and product markets should ultimately support further upside,” indicating that the latest pullback is viewed as a short-lived correction within a constructive medium-term backdrop for oil.

At the same time, analysts have cautioned that a sustained rise in oil prices could weigh on India’s growth outlook, constrain government capital spending, and push inflation higher in the short term.

Standard Chartered Rules Out Near-Term Relief on Retail Fuel Prices

Standard Chartered analysts have withdrawn their prior expectation of a retail fuel price cut in FY27. They argue that “lingering geopolitical uncertainty is likely to push inflation higher” and complicate policy conditions. The bank points to “geopolitical uncertainty, crude oil price volatility and rising losses for public-sector oil companies and the government” as reasons for abandoning its projected “INR 2.5 per liter reduction in retail fuel prices from September 2026.”

Standard Chartered cites estimates that “losses were already around 0.3% of GDP in Q1-FY27, according to the oil minister, and could reach 0.4-0.5% by H1-FY27 if crude stays at USD 85-90/bbl, especially with the INR 10/liter excise-duty cut still in place.” It concludes that “with geopolitical tensions lingering and oil companies still reporting losses on retail fuel sales (including cooking gas), fuel-price cuts look unlikely in FY27 (see India – How the energy supply shock was managed).”

US Dollar Softens as Markets Reprice Fed Path

The US Dollar is trading on the back foot in the Asian session, as fading worries over additional Federal Reserve (Fed) rate hikes help anchor a bearish short-term tone. The US Dollar Index, which tracks the Greenback against six major counterparts, is slightly lower and hovering near 99.89 at the time of writing.

Data from the CME FedWatch tool indicate that the probability of the Fed keeping rates unchanged in September has climbed to nearly 65%. This marks a sharp reversal from a month earlier, when markets were pricing in a 75% chance that the Fed would implement two rate increases by the end of the September policy meeting.

India Wholesale Inflation Moderates in July

The Office of the Economic Adviser of India reported that wholesale price inflation rose at a moderate pace of 9.78% in July. This reading came in below expectations of 10.25% and slightly under the previous figure of 9.87%.

USD/INR Technical Picture: Narrow Range Around Key Support

USD/INR is quoted at 95.42, holding just above an upward-sloping support line at 95.36, which aligns with the 20-day exponential moving average. This setup signals a phase of compressed volatility, with the Relative Strength Index (RSI) remaining steady around 48.

On the upside, initial resistance sits near the July 29 peak close to 96.00, followed by the record high around 97.10. On the downside, the first support is the rising trendline at 95.36; a clear break below this level would reinforce a bearish bias and open the way toward the June 26 low at 94.15.