Indian Rupee declines against US Dollar as Middle East war risks revive

The Indian Rupee (INR) fails to hold opening strength and falls lower against the US Dollar (USD) on Thursday. The USD/INR pair recovers to near 94.25 as oil prices bounce back strongly, following threats from United States (US) President Donald Trump that military attacks on Iran could intensify in the next few weeks.

Oil prices recover as Middle East risks revive

Market sentiment has turned unfavorable for risk-sensitive assets again as comments from United States (US) President Donald Trump, in his scheduled address on Iran, signaled that Washington will intensify military action against Tehran. “We are going to hit them extremely hard over the next two to three weeks, and bring them back to the Stone Ages,” Trump said.

US President Trump didn’t rule out attacking Iran’s electricity infrastructure if it doesn’t accept a deal. “If there is no deal, we are going to hit each and every one of their electric generating plants very hard and probably simultaneously,” Trump said.

The revival of risks that the Middle East war is far from a ceasefire has boosted global oil prices. WTI oil price rallies almost 6.5%, slightly above $100 in the Asian trade. Higher oil prices are an unfavorable scenario for the Indian Rupee, given that the Indian economy relies heavily on oil imports to meet its energy needs.

FIIs continue to dump their stake in Indian stock market

Amid the risk-off impulse and higher oil prices due to Middle East conflicts, Foreign Institutional Investors (FIIs) keep offloading their stake in the Indian stock market. FIIs remained net sellers on the first day of the Financial Year (FY) 2026-27 and sold shares worth Rs. 8,331.15 crore. In March, FIIs cut their stake worth Rs. 1,22,539.89 crore.

RBI bans banks from offering INR NDFs to clients

The Indian currency attracts bids, following the announcement of additional measures by the Reserve Bank of India (RBI) to curb speculative activities.

On Wednesday, the RBI stepped up its efforts to support the currency by barring banks from offering rupee non-deliverable forwards to resident and non-resident clients and preventing companies from rebooking canceled forward contracts, Reuters reported.

However, the qualitative measures adopted by the Indian central bank to support the domestic currency against the US Dollar are unlikely to limit its downside for long, as ongoing geopolitical tensions and the consistent outflow of foreign funds from the Indian stock market have remained key drags on the Indian Rupee.

Technical Analysis: USD/INR sees more upside as 20-day EMA keeps rising

USD/INR trades higher at around 94.25 as of writing. The near-term bias is bullish amid the recent sequence of higher closes, with price holding well above the rising 20-day Exponential Moving Average (EMA), which is around 93.40.

The 14-day Relative Strength Index (RSI) has retreated from overbought extremes above 80 to the mid-60s, indicating that the positive momentum is intact but with some cooling after the sharp rally.

Initial support emerges near 93.40, where the 20-day EMA currently aligns with a recent consolidation area, and a break below this level would open the door toward the January 28 high of 92.52. A deeper weakness from there would expose the next support zone around 92.10. On the upside, immediate resistance stands at 95.00, with a sustained break targeting the peak of 96.00.

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