USD/INR remains stronger due to increased safe-haven demand
- The USD/INR pair reached a fresh record high of 92.67 on Wednesday.
- Indian Rupee remains under pressure amid higher Oil prices driven by the ongoing war in the Middle East.
- The INR weakens as investors withdraw over $350 million from equities amid rising risk aversion.
The Indian Rupee (INR) declines against the US Dollar (USD), extending its losing streak for the fifth successive session. The USD/INR pair reached a fresh record high of 92.67 during the Asian hours on Wednesday. Traders expect the Reserve Bank of India (RBI) to sell dollars to avert steeper rupee losses.
The INR faces challenges due to higher Oil prices, which could be attributed to the ongoing war in the Middle East. India imports over 80% of its crude Oil needs. When Oil prices rise, India must pay more in dollars to buy the same quantity of crude.
The USD/INR pair could further appreciate as the Indian Rupee struggles with increased risk aversion amid geopolitical conflict in the Middle East. Foreign fund outflows from the Indian stock market weighed on the Indian Rupee. Rising risk aversion led investors to pull over $350 million from Indian equities on Monday.
The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against six major currencies, extends gains for the third consecutive day, trading around 99.10 at the time of writing. Traders will likely observe the US ISM Services Purchasing Managers’ Index (PMI), due later in the North American session.
The Greenback advances on fading expectations of imminent rate cuts from the Federal Reserve (Fed). The yield on the US 10-year Treasury note holds around 4.06% at the time of writing after rising for two consecutive sessions amid elevated inflation fears.
Higher energy prices have added to inflation concerns, prompting markets to scale back bets on near-term policy easing. Investors largely expect the US central bank to keep interest rates unchanged until summer, despite calls from US President Donald Trump for lower borrowing costs.
US President Donald Trump noted the US Navy would provide insurance support to commercial vessels in the Gulf after Iran effectively disrupted traffic through the Strait of Hormuz. He added that US forces would escort ships if necessary, following reports that Iranian forces had fired on several vessels, per BBC.
Israel reportedly hit a building where Iranian clerics were meeting to choose a new Supreme Leader. US President Donald Trump warned that the escalation could pave the way for an equally hardline leadership in Iran, underscoring uncertainty surrounding the conflict’s outcome.
Technical Analysis: USD/INR reaches fresh record highs above 92.50
USD/INR reaches fresh record highs above 92.50 at the time of writing. The technical analysis of the daily chart indicates a persistent bullish bias as the pair is positioned above the upper boundary of the ascending channel pattern.
The near-term bias is bullish as the USD/INR pair holds well above the rising 50-day Exponential Moving Average (EMA) near 90.84, while the nine-day average accelerates higher and stays above the medium-term gauge, confirming strengthening upside momentum.
The Relative Strength Index (RSI) stands in overbought territory around 74, indicating firm buying pressure, though stretched conditions could cap the pace of further gains rather than reverse the trend immediately.
A break above the record high at 92.67 would lead the USD/INR pair to approach the psychological level of 93.00. On the downside, a pullback to the ascending channel would expose the initial support at the nine-day EMA at 91.62, followed by the lower channel boundary around 91.50.
(The technical analysis of this story was written with the help of an AI tool.)
Risk sentiment FAQs
In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.
Author
Akhtar Faruqui
FXStreet
Akhtar Faruqui is a Forex Analyst based in New Delhi, India. With a keen eye for market trends and a passion for dissecting complex financial dynamics, he is dedicated to delivering accurate and insightful Forex news and analysis.
