The Indian Rupee (INR) strives to regain ground against the US Dollar (USD) during afternoon trading hours in India on Tuesday, following an underperformance in the opening trade. The USD/INR drops to near 94.15 from the morning high of 94.30 as the US Dollar gives back its early gains amid improvement in investors’ risk-appetite.
As of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, is marginally up to near 99.20 after surrendering almost its entire early gains. S&P 500 futures have recovered its entire early losses and have turned positive around 6,600.00, indicating an increase in demand for riskier assets. Meanwhile, the Nifty 50 is also 2% higher around 23,000.
US Dollar’s outlook remains broadly firm
The outlook of the US Dollar remains broadly firm as Iran has denied any involvement in negotiations with the United States (US) over resolving hostilities in the Middle East. Iran’s refusal to the occurrence of de-escalation talks has also resulted in a decent recovery in the oil price, a scenario that bodes poorly for currencies from countries that largely rely on oil imports to meet their energy needs.
On Monday, US President Donald Trump announced that he has instructed the Department of War to hold scheduled military attacks on Iran’s power plants for five days, citing that Washington is having “very good and productive conversations” with Tehran regarding a complete and total resolution of hostilities in the Middle East.
The US Dollar has outperformed strongly in the past few weeks due to an increase in demand for safe-haven assets amid Middle East conflicts and surging energy prices, which have discouraged traders from betting on the Federal Reserve’s (Fed) interest rate cuts this year.
Market experts believe that higher energy prices due to oil supply disruption are expected to stay longer as the damage to energy infrastructure in Gulf economies amid the war is unlikely to be repaired soon, signaling persistent firmness in the US Dollar. “The war has resulted in lasting damage to infrastructure, so even if it’s over soon, energy prices may well remain higher,” analysts at Capital Economics said.
Consistent FIIs selling hurts Indian Rupee
The continuous outflow of foreign funds from the Indian stock market is consistently hurting the Indian Rupee. So far in March, Foreign Institutional Investors (FIIs) have remained net sellers on all trading days and offloaded their stake worth Rs. 97,195.12 crore.
On the domestic front, India’s preliminary private sector Purchasing Managers Index (PMI) data for March has come in lower due to a slowdown in business activities in both the manufacturing and the services sectors. India’s flash Composite PMI has arrived at 56.9, lower than 58.9 in February.
“Output growth eased across both manufacturing and services as the energy shock unfolds. Softer domestic demand weighed on new orders, which rose at the slowest pace in more than three years, despite a record surge in new export orders. Cost pressures intensified, but companies are absorbing part of the increase by squeezing margins,” Pranjul Bhandari, Chief India Economist at HSBC, said.
Technical Analysis: USD/INR aims to reclaim all-time highs at around 94.50
USD/INR trades higher at around 94.15 at the press time. The near-term bias is bullish as price extends above the rising 20-day Exponential Moving Average (EMA), confirming a short-term uptrend.
Momentum remains firm with the 14-day Relative Strength Index (RSI) holding in overbought territory above 70, showing strong buying pressure and limited evidence of exhaustion so far. The sequence of higher closes and the sustained distance above the 20-day EMA underline dip-buying interest on minor pullbacks.
Initial support is at the 20-day EMA near 92.70, where a break would expose secondary support around 92.00. Deeper weakness would target 91.40, aligning with a prior consolidation band. On the upside, immediate resistance emerges at 94.50, with a break opening the way toward 95.20 as the next bullish objective. As long as price holds above 92.70, the upside structure remains intact and pullbacks are expected to be shallow.
(The technical analysis of this story was written with the help of an AI tool.)
