Indian Rupee faces headwinds from Middle East risks, hawkish Fed bets
- The Indian Rupee drops against the US Dollar at the start of the US data-packed week.
- Higher oil prices due to renewed US-Iran tensions have weighed on the Indian Rupee.
- Fed’s Warsh reiterates that officials are committed to countering high inflation.
The Indian Rupee (INR) opens slightly lower against the US Dollar (USD) at the start of the week. The USD/INR pair ticks up to near 95.43, as higher oil prices due to renewed tensions between the United States (US) and Iran have weighed on the Indian currency.
In the opening session, the MCX Crude Oil price contract expiring on September 21 trades 2.13% higher to near Rs. 8,160.
Lower oil prices bode well for currencies from economies such as India, which rely heavily on oil imports to meet their energy needs.
US and Iran exchange attacks near Hormuz Strait
The exchange of attacks between the US and Iran over the weekend has refreshed fears of military aggression in the Middle East. On Sunday, the US Central Command (CENTCOM) struck Iranian rocket launchers that were preparing to send mines into the Strait of Hormuz, following weeks of relative calm, Bloomberg reported.
In response, Iran's Islamic Revolutionary Guard Corps (IRGC) launched ballistic missile strikes on two US bases in Jordan in retaliation for the US attack on Larak Island.
The restart of the war could prompt fears of a prolonged global oil supply disruption. Financial market participants might not have anticipated US military aggression, as it said earlier this month that it would pursue economic pressure on Tehran to force it to a deal.
Fed’s Warsh reiterates upside inflation risks
At the Jackson Hole Symposium on Friday, Federal Reserve (Fed) Chairman Kevin Warsh reiterated that board members are committed to bringing inflation down to the 2% target.
“This summer's inflation data better than expected, but do not tell me underlying trends have meaningfully changed," Fed Chair Warsh said and added, "Fed's predominant focus right now should be on prices."
Warsh didn’t deliver any remarks regarding the monetary policy outlook, as expected; however, traders raised Fed interest rate hike bets following his remarks.
According to the CME FedWatch tool, the odds of the Fed leaving interest rates unchanged again in the September meeting have diminished to 39.4% from almost 60% seen a week ago.
US NFP will be key event
This week, the major trigger for the US Dollar will be the US Nonfarm Payrolls (NFP) data for August, which will be released on Friday. Investors will closely track the official employment data to get fresh cues regarding the Fed’s interest rate outlook.
July’s NFP report strongly impacted the Fed’s interest rate expectations after it revealed that US employers fired 23K workers while they were anticipated to hire 80K fresh workers.
India's Q2 GDP data
India's Q2 Gross Domestic Product (GDP) data has come in stronger than expected. The GDP growth remained steady at 7.8% on an annualized basis, faster than estimates of 7.1%.
USD/INR Technical Analysis
In the daily chart, USD/INR trades at 95.43, maintaining a neutral near-term bias as spot remains close to the 20-day exponential moving average (EMA) at 95.53.
The Relative Strength Index (RSI) around 45 stays below the neutral 50 line, reinforcing a lack of bullish momentum rather than signaling oversold conditions.
On the topside, immediate resistance is located at the 20-day EMA near 95.53, which needs to be reclaimed to ease the current bearish tone and open the way for a more sustained recovery. Above the dynamic EMA, the 96.00 level could act as a key hurdle for the pair. Looking down, the August 5 low at 94.92 could be the key support level.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Economic Indicator
Nonfarm Payrolls
The Nonfarm Payrolls release presents the number of new jobs created in the US during the previous month in all non-agricultural businesses; it is released by the US Bureau of Labor Statistics (BLS). The monthly changes in payrolls can be extremely volatile. The number is also subject to strong reviews, which can also trigger volatility in the Forex board. Generally speaking, a high reading is seen as bullish for the US Dollar (USD), while a low reading is seen as bearish, although previous months' reviews and the Unemployment Rate are as relevant as the headline figure. The market's reaction, therefore, depends on how the market assesses all the data contained in the BLS report as a whole.
Read more.Next release: Fri Sep 04, 2026 12:30
Frequency: Monthly
Consensus: 58K
Previous: -23K
Source: US Bureau of Labor Statistics
America’s monthly jobs report is considered the most important economic indicator for forex traders. Released on the first Friday following the reported month, the change in the number of positions is closely correlated with the overall performance of the economy and is monitored by policymakers. Full employment is one of the Federal Reserve’s mandates and it considers developments in the labor market when setting its policies, thus impacting currencies. Despite several leading indicators shaping estimates, Nonfarm Payrolls tend to surprise markets and trigger substantial volatility. Actual figures beating the consensus tend to be USD bullish.
Author
Sagar Dua
FXStreet
Sagar Dua is associated with the financial markets from his college days. Along with pursuing post-graduation in Commerce in 2014, he started his markets training with chart analysis.
