The Indian Rupee (INR) traded marginally higher against the US Dollar (USD) in early trade on Wednesday as falling crude oil prices supported sentiment for the domestic currency.
The USD/INR pair slipped toward 95.70 after oil prices failed to sustain Tuesday’s recovery amid continued optimism surrounding a possible agreement between the United States and Iran.
At the time of writing, WTI crude oil prices were trading nearly 1.8% lower at around $90.80 per barrel.
The decline in oil prices supported currencies of major oil-importing nations such as India, as lower crude prices help reduce import costs and ease pressure on trade balances.
Oil prices retreat as US-Iran talks remain in focus
Market participants continued to monitor developments surrounding negotiations between the US and Iran despite renewed geopolitical tensions in the Middle East.
On Tuesday, Iran’s Islamic Revolutionary Guard Corps (IRGC) threatened retaliation after the United States carried out strikes in southern Iran. The US Central Command described the attacks as acts of “self-defense.”
Meanwhile, Iran’s Foreign Ministry condemned the strikes and called them a “gross violation” of the ceasefire.
Despite the military tensions, negotiations aimed at ending the Middle East conflict and reopening the Strait of Hormuz continued through mediators.
The Strait of Hormuz remains a crucial route for global energy supply, accounting for nearly 20% of worldwide oil shipments.
According to a report by Fars agency, an Iranian official stated on Tuesday that the unfreezing of Iranian funds remained the final major issue in discussions with the United States, with mediation efforts being handled by Qatar.
However, there was no official confirmation regarding the progress.
Earlier this week, US Secretary of State Marco Rubio stated that the Strait of Hormuz must remain open one way or the other, while also noting that finalising a deal with Iran could take several more days.
Foreign investors remain cautious on Indian equities
Foreign Institutional Investors (FIIs) continued to show mixed participation in Indian equity markets throughout the month, with alternating buying and selling patterns reflecting cautious investor sentiment.
On Tuesday, overseas investors turned net sellers and offloaded equities worth Rs. 2,407.87 crore.
This came after FIIs had purchased equities worth Rs. 821.75 crore on Monday.
The inconsistent flow of foreign investments indicated that investors remained cautious amid global uncertainty and geopolitical developments.
The US Dollar Index hovered near the 99.00 mark as traders awaited additional clarity regarding negotiations between Washington and Tehran.
Investors also shifted focus toward the upcoming US Personal Consumption Expenditure (PCE) Price Index data for April, scheduled for release on Thursday.
The inflation report is expected to provide fresh signals regarding the Federal Reserve’s monetary policy outlook.
The US core PCE inflation gauge, which remains the Federal Reserve’s preferred inflation measure, is expected to rise 3.3% annually in April compared to 3.2% in March.
Every month, the index is projected to increase by 0.3%.
The inflation reading could influence expectations regarding future interest rate decisions by the Federal Reserve.
USD/INR technical outlook remains constructive
From a technical perspective, USD/INR continued to maintain a constructive bullish structure despite the pair trading marginally lower around 95.70.
The pair remained above the 20-day Exponential Moving Average (EMA) positioned near 95.44, indicating that the broader upward momentum remained intact.
The upward slope of the EMA suggested that the recent rally still had support, while the Relative Strength Index (RSI) near 56 reflected positive momentum without entering overbought territory.
On the downside, immediate support was seen near the 20-day EMA around 95.44.
A break below this level could weaken short-term momentum and expose the pair to a deeper correction toward 95.00.
On the upside, a move above the May 22 high near 96.37 could open the path toward a retest of the all-time high around 97.00.
