Rupee Strengthens as Oil Slide and U.S. Politics Pressure the Dollar

Key Moments

Rupee Rises on Steep Pullback in Oil

The Indian Rupee (INR) extends its previous trading day’s strength against the U.S. Dollar (USD) on Monday, supported by a pronounced decline in oil prices. As of writing, the USD/INR pair is down 0.23%, trading close to 94.72.

At the start of the week, the MCX Crude Oil contract expiring on November 19 is sharply lower, falling almost 4% to around Rs. 9,545. This marks a retreat from Friday’s multi-month high of Rs. 9,972.

The reversal in oil prices is generally favorable for currencies of countries that depend heavily on imported oil for their energy requirements, such as India.

Drivers of the Oil Price Correction

Crude oil prices opened the week significantly weaker amid renewed optimism about a possible diplomatic solution between the United States and Iran.

Over the weekend, U.S. Secretary of State Marco Rubio stated that Washington has not decided to resume strikes on Tehran and that President Donald Trump favors a diplomatic approach. However, Rubio cautioned that the United States retains the capability to pursue any military objective the president might choose.

The signal from Washington that it is prepared to prioritize diplomacy over joint military action with Israel after the midterm elections, as previously indicated, has eased concerns about prolonged disruptions to energy supplies.

At the same time, commentary from Iran has also helped reduce fears around supply risks. Iranian officials have indicated that they can reopen the Strait of Hormuz, which is a crucial route for nearly 20% of global energy flows.

Iran’s Foreign Minister Abbas Araghchi said talks are ongoing with Qatari mediators on a plan to reopen the Strait of Hormuz within two days if the U.S. cooperates, Al Jazeera reported.

Oil and FX Snapshot

U.S. Midterm Elections in Focus for the Dollar

This week, U.S. midterm elections on Tuesday are seen as a major catalyst not only for the U.S. Dollar but also for broader global markets.

Analysts at ING argue that political risk linked to the upcoming midterms has become the main short-term driver for the greenback. They note that “the main risk for the dollar today is some precautionary unwinding of net-long positions ahead of Tuesday’s US midterm elections,” as positioning could be exposed to changes in the political backdrop.

ING highlights that “a Democratic sweep is trading around 68% in prediction markets,” and cautions that this scenario “could be seen as slightly negative for the US dollar from a few angles, from higher risk of government shutdown and gridlock on debt ceiling negotiations to potential damage to already shaky AI-related sentiment.” In this context, the bank advises investors not to turn excessively positive on the Dollar in the immediate term, adding: “We’d be cautious in chasing the USD upside in the next few days.”

USD/INR Technical Overview

On Monday, USD/INR slips toward 94.70, maintaining a negative short-term tone as spot prices remain below the 20-day Exponential Moving Average (EMA) at 95.23.

The pair continues to face pressure from this 20-day EMA, which is acting as near-term resistance. The Relative Strength Index (14) is hovering around 40, pointing to muted momentum without yet signaling oversold conditions, and suggesting the potential for additional downside.

On the upside, the initial resistance level aligns with the 20-day EMA around 95.23. A clear break above this area would be needed to relieve the current bearish bias and pave the way for a more substantial recovery. On the downside, the September low at 94.28 is seen as a key support zone for the pair.