The Indian Rupee (INR) opened firmly against the US Dollar (USD) on Tuesday, with the USD/INR pair trading lower around 94.58. This strength in the Rupee is attributed to lower oil prices following the reopening of the Strait of Hormuz after a peace deal was signed between the United States and Iran. US President Donald Trump announced on Monday that the peace deal had been signed and the Strait had fully reopened, confirming that Tehran would not have nuclear weapons. Investors are awaiting further details of the deal, particularly regarding whether the Strait will remain toll-free, but the resumption of normal traffic is expected to keep oil prices lower, which is favorable for the Indian currency [1].
In the commodities market, the MCX Crude Oil contract expiring on June 18 rose slightly to near 7,640 in the opening session, but remained close to its over eight-week low of 7,550 posted on Monday. Lower oil prices tend to benefit currencies of economies like India that rely heavily on oil imports [1].
Foreign Institutional Investors (FIIs) became net buyers in the Indian stock market for the first time in June on Monday, after having sold shares worth Rs. 46,430.42 crore in the first two weeks. On Monday, FIIs bought shares worth Rs. 200.05 crore. The improvement in foreign investor sentiment towards Indian equities is linked to the US-Iran peace deal, which has eased global risk-off sentiment [1].
Looking ahead, investors are focused on the upcoming two-day Federal Reserve policy meeting, with the Fed expected to keep interest rates unchanged in the 3.50%-3.75% range. Market participants will closely watch the Fed's policy guidance under new Chairman Kevin Warsh. US President Trump has publicly stated that he wants Chairman Warsh to be 'totally independent' in his decision-making, in contrast to his previous criticisms of former Chairman Jerome Powell [1].
From a technical perspective, USD/INR remains weak at around 94.58, continuing a corrective phase below its 20-day exponential moving average (EMA) at 95.2580, which now acts as the first topside barrier and keeps the near-term bias tilted lower [1].
CONCLUSION
The Indian Rupee has gained strength due to lower oil prices and renewed FII interest following the US-Iran peace deal. Market participants are now awaiting further details of the deal and the outcome of the upcoming Federal Reserve policy meeting for additional direction.