Indian Rupee falls as US Dollar holds gains

The Indian Rupee (INR) opens on a cautious note against the US Dollar (USD) on Thursday due to overnight gains in the latter. The USD/INR pair edges up to near 95.42 after a corrective move the previous day, as fears of a prolonged global energy supply disruption have strengthened the US Dollar.

As of writing, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, trades firmly near Wednesday’s high at 100.06.

Investors doubt US Dollar’s strength

Though the US Dollar is outperforming its peers as continued Middle East tensions have increased its safe-haven demand, easing fears of a near-term Federal Reserve (Fed) interest rate hike due to an expected slowdown in the United States (US) Consumer Price Index (CPI) growth in July have raised concerns over its strength.

According to TD Securities, the July US CPI report “should continue to bring relief to the Fed regarding the need for tighter policy, at least in the near horizon.” The bank points to “signs of normalization in services prices along with tariff pass-through that remains under control” as factors that “bode well for concerns around sticky core inflation.” On that basis, TD Securities reiterates that “we remain of the view that the Fed will keep its policy stance unchanged this year.”

In terms of market reaction, TD Securities notes that “markets remain relatively unchanged in the wake of the July report, with the pricing for a hike in the September meeting still sitting just under 50%.

Oil prices recover

The absence of progress in US-Iran negotiations on the reopening of the Strait of Hormuz, a critical chokepoint for almost 20% of global energy supply, has staged a strong recovery in oil prices.

In the opening trade, the MCX Crude Oil contract expiring on August 19 trades almost flat at around Rs. 7,920 after a weak opening, tracking losses in global oil prices.

Currencies from economies, such as India, which rely heavily on oil imports to meet their energy needs, tend to underperform in a high-oil-price environment.

On Wednesday, oil prices faced sharp selling pressure as OPEC revised its global oil demand growth forecast for the current year to 580,000 barrels per day (bpd) from the previous forecast of 780,000 bpd.

India’s retail CPI accelerates in July

Inflation in India at the retail level accelerated to 4.45% Year-on-Year (YoY) in July from 4.38% in June, almost in line with estimates of 4.50%. The retail CPI remains within the Reserve Bank of India’s (RBI) tolerance band of 2%-6%.

Technical Analysis: USD/INR trades close to 20-day EMA

USD/INR trades at around 95.42, keeping a mild bearish near-term bias as it holds below the 20-period Exponential Moving Average (EMA) at 95.50. Price action remains under this short-term trend proxy, suggesting rallies are capped for now, while the Relative Strength Index (14) at 46.74 stays in neutral-to-soft territory, hinting at lacklustre bullish momentum rather than a decisive selloff.

On the downside, initial support is aligned with the former break point of the rising trend line at 95.30, which now acts as an underlying floor for the pair; below that, the August 5 low at 94.83 is the critical support level. On the topside, a recovery would first need to clear the 20-period EMA at 95.50 to ease bearish pressure, with a sustained move above this level required to shift the bias towards a more constructive stance. Looking up, the 96.00 level would be the next hurdle for the pair.

(The technical analysis of this story was written with the help of an AI tool. Know more.)