Indian Rupee rally hits pause as oil price recovers strongly, Fed policy awaited

The Indian Rupee corrects against the US Dollar after rising for three straight trading days.
Oil prices bounce back strongly on revival of geopolitical risks.
Investors await the Fed’s policy announcement, which is scheduled at 18:00 GMT.

Sagar Dua FXStreet

The Indian Rupee (INR) trades marginally lower against the US Dollar (USD) on Wednesday after a three-day winning streak. The USD/INR pair rebounds to near 95.85, the intraday high, as oil prices have rebounded strongly due to revived geopolitical risks.

In India's late trading hours, the MCX Crude Oil contract expiring on August 19 is up 5% at around Rs. 7,990, snapping a three-day losing streak.

A sharp recovery in oil prices bodes poorly for the Indian currency, given that India covers 85% of its energy needs from imports. Higher oil prices increase foreign outflows from reserves.

US-Saudi forces jointly attack Iran-aligned military

Late Tuesday, the United States (US) Central Command (CENTCOM) and Saudi Arabia, in a joint operation, reported carrying out precision strikes in Iraq targeting Iran-backed groups for planning attacks on US forces and Saudi oil facilities in the Eastern Province and Riyadh regions, AlJazeera reported.

The exchange of attacks in the Middle East has renewed fears of a prolonged closure of the Strait of Hormuz, which is a vital passage for almost 20% of global energy supply.

Meanwhile, the announcement from the Iranian Islamic Revolutionary Guard Corps (IRGC) that three oil tankers were 'struck and stopped' a few hours ago after ignoring warnings in the Hormuz indicates that energy transport from the passage remains shut, a scenario that will keep global oil supply squeezed.

Fed’s monetary policy decision awaited

The major event of the week will be the Federal Reserve’s (Fed) monetary policy decision, which will be announced at 18:00 GMT. The CME FedWatch tool shows that traders see a 69.5% chance that the Fed, will leave interest rates unchanged in the range of 3.50%-3.75%. This will be the fifth straight policy meeting when the Fed will maintain the status quo.

Financial markets should not expect monetary policy guidance from the as Chairman Kevin Warsh explicitly said in the previous meeting that “so-called forward guidance is not well-suited in the current policy juncture”.

Ahead of the Fed’s policy announcement, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, trades 0.13% lower to near 101.25.

Bloodbath in KOSPI – Boon for Indian markets

Plummeting KOSPI stock markets due to nosediving shares of memory-chip manufacturer giant SK Hynix could turn out to be a boon for Indian equity markets in the near term. The Indian stock market underperformed in the last year as global investors diverted their funds to equity markets in South Korea and Taiwan to play the Artificial Intelligence (AI) and semiconductors theme.

The significant plunge in South Korean markets is expected to force global investors to return to the Indian stock market, a scenario that will boost foreign inflows and hence strengthen the Indian currency.

Technical Analysis: USD/INR faces pressure near 20-day EMA

USD/INR trades higher at around 95.70 at press time, but is keeping a mild bearish near-term bias as it holds just under the 20-day Exponential Moving Average (EMA) at 95.8921.

The pair has slipped back below this short-term average after recent gains, suggesting rallies are being capped by nearby overhead supply, while the Relative Strength Index (14) near 50 hints at fading momentum rather than a decisive directional push.

On the topside, immediate resistance is aligned with the 20-day EMA around 95.89, and a sustained break above this barrier would be needed to resume the journey toward the all-time high at 97.10. Looking down, Tuesday's low at 95.51 is the key support zone, followed by 95.00.

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

Economic Indicator

Fed Interest Rate Decision

The Federal Reserve (Fed) deliberates on monetary policy and makes a decision on interest rates at eight pre-scheduled meetings per year. It has two mandates: to keep inflation at 2%, and to maintain full employment. Its main tool for achieving this is by setting interest rates – both at which it lends to banks and banks lend to each other. If it decides to hike rates, the US Dollar (USD) tends to strengthen as it attracts more foreign capital inflows. If it cuts rates, it tends to weaken the USD as capital drains out to countries offering higher returns. If rates are left unchanged, attention turns to the tone of the Federal Open Market Committee (FOMC) statement, and whether it is hawkish (expectant of higher future interest rates), or dovish (expectant of lower future rates).

AUD/USD edges higher above 0.7050 as hot CPI lifts RBA rate hike odds

The AUD/USD pair gathers strength to near 0.7055 during the Asian trading hours on Thursday. The Australian Dollar edges higher against the US Dollar as hotter inflation data bolsters expectations of Reserve Bank of Australia rate hikes. The US September Personal Consumption Expenditures inflation report will be in the spotlight later on Thursday.

USD/JPY retakes 158.00 as USD stalls the post-FOMC corrective slide

USD/JPY attracts some dip-buyers during the Asian session on Thursday, climbing back above 158.00 as the US Dollar reverses part of the post-FOMC pullback from a two-week high. Bulls, however, await key US macro data – the Advance Q3 GDP and the PCE Price Index – before positioning for further gains. Focus will then shift to the crucial BoJ policy update on Friday amid firming expectations for a December rate hike.

Gold weakens further below $4,050 amid Fed rate hike bets and Iran risks

Gold sticks to intraday losses below the $4,050 level heading into the European session ,and for now seems to have snapped a three-day winning streak to the weekly top set the previous day. The US Dollar attracts fresh buyers after Wednesday's post-FOMC corrective slide from a two-week high and is seen as a key factor weighing on the precious metal.

US GDP expected to grow at 3.2% in Q3

The United States Bureau of Economic Analysis is set to publish its preliminary estimate of the Gross Domestic Product for the July-September period on Thursday, with analysts expecting the data to show annualised growth at a solid 3.2%, a decent improvement from the 2.2% expansion recorded in the previous quarter. Markets brace for US growth and PCE data amid geopolitical jitters

European Central Bank is expected to hold interest rates despite high inflation pressures

The European Central Bank concludes its two-day monetary policy meeting on Thursday and will announce its decision at 13:15 GMT. The bank is widely expected to leave the interest rate on the Main Refinancing Operations and the Deposit Facility unchanged at 2.65% and 2.50%, respectively, after having raised both of them by 25 basis points in September.

Anthropic pledged $270 billion to Amazon, Google, and Microsoft. Here's who actually gets paid

Anthropic owes Amazon, Google, and Microsoft at least $269.4 billion for computing power, even if it uses less. All three sell its models and handle its billing, and Amazon and Google own stakes and lend it money, so they get paid regardless of how the IPO goes. The Dario Amodei-led Anthropic filed its initial public offering (IPO) on Monday, seeking a listing on the Nasdaq under the ticker ANT.