The Indian Rupee appreciated sharply against the US Dollar on Friday, with the USD/INR pair declining to near 96.50, following intervention by the Reserve Bank of India (RBI) to support the currency [1]. According to a Reuters report cited in the article, the RBI was likely selling US dollars near the 96.80 INR level, with state-run banks observed offering US dollars, presumably on the central bank's behalf [1]. The RBI had also intervened in both spot and non-deliverable forwards (NDFs) markets on Thursday to bolster the Rupee [1].
Despite the RBI's actions, the article notes that this support is expected to be temporary, as surging oil prices and renewed expectations of US Federal Reserve interest rate hikes could put further pressure on the Indian Rupee [1]. Oil prices have risen significantly in recent weeks due to escalating military tensions between the United States and Iran, including the closure of the Bab el-Mandeb Strait by Yemen’s Iran-aligned Houthis, which has further tightened global energy supplies [1]. This scenario is particularly negative for the Rupee, given India's reliance on oil imports [1].
The rise in oil prices has also revived hawkish expectations for the Federal Reserve, with the CME FedWatch tool indicating a 35.8% probability of a rate hike at the upcoming policy meeting, up from 11.8% the previous week [1]. This shift has driven US Treasury yields to around 4.70%, the highest since January 2025, and strengthened the US Dollar Index (DXY), which was trading near a three-week high at approximately 101.50 on Thursday [1].
From a technical perspective, USD/INR is trading lower at around 96.50 but remains above the 20-day Exponential Moving Average (EMA) at 95.9678, maintaining a bullish bias. The Relative Strength Index (RSI) is around 61, indicating firm but not overbought momentum. Immediate support is seen at the 20-day EMA near 95.97, while resistance is at the all-time high of around 97.10 [1].
CONCLUSION
The RBI's intervention has provided short-term support for the Indian Rupee, but persistent upward pressure from rising oil prices and hawkish Fed expectations may limit further gains. Market participants are closely watching technical levels and global developments, as the Rupee remains vulnerable to external shocks.