Indian Rupee rallies further on RBI Malhotra's intervention remarks

The Indian Rupee (INR) opens on a strong note against the US Dollar (USD) at the start of the week. The USD/INR pair extends its losing streak for the fourth trading day on Monday, sliding to near 95.20, the lowest level seen in almost two weeks.

The Indian currency has appreciated due to hopes of further Reserve Bank of India’s (RBI) intervention in forex markets. Also, a significant decline in oil prices at open due to improved hopes of the United States (US)-Iran deal strengthened the Indian Rupee. While there has been a sharp recovery move in oil prices after Iran stated that the Strait of Hormuz issue belongs to coastal countries.

RBI Governor Malhotra keeps door open for further intervention in forex markets

In an interview with Mint, earlier in the day, RBI Governor Sanjay Malhotra assured that the central bank is ready to intervene against one-way excessive moves against the domestic currency. Malhotra added the central bank has enough tools in its ‌kit, ⁠including nearly $700 billion in reserves to quell any undue speculative movement, which backs his confidence.

RBI’s Malhotra also expressed confidence that the Indian Rupee would start appreciating once the Middle East situation will start normalizing.

A significant Indian Rupee’s recovery after RBI Governor Malhotra’s interview suggests that his comments have brought at least an immediate improvement in investors’ sentiment toward the domestic currency. The Indian Rupee’s performance in the last year has been the worst among its Asian peers due to several reasons, especially the trade war with the US, elevated oil prices and significant Gold imports.

Iran says Hormuz issue belongs to coastal countries

In India's afternoon trading hours, the WTI Oil price recovers to near $91.60 after sliding over 6% at around $89.50, following Tehran's comments that issues relating to the Strait of Hormuz belong to costal nations. "Management of the Strait belongs to the coastal countries," the Iranian Foreign Ministry said, adding, that the potential MoU in disussion with the US has "no specific details about the Hormuz management

In the opening trade, oil prices cracked after US President Donald Trump expressed confidence, through post on Truth Social, that the agreement is “largely negotiated” with Iran and the Strait of Hormuz will be reopened soon. Trump added, “In addition to many other elements of the Agreement, the Strait of Hormuz will be opened.”

However, later in a post, US President Trump said that Washington is in “no rush for a deal” as “time is on our side”, adding, “The negotiations are proceeding in an orderly and constructive manner.”

Currencies from economies, such as India, which rely heavily on oil imports to meet their energy needs, attract bids following a sharp correction in oil prices.

FIIs remained net sellers for straight fourth trading day

Foreign Institutional Investors (FIIs) are turning out to be net sellers in the Indian stock market for the last four trading days, and have offloaded their stake worth Rs. 10,386.52 crore. Overseas investors continue to pare their stake in the Indian equity market due to growing concerns over India Inc.’s projected earnings amid energy price shock.

Lower US Dollar also hurts USD/INR

A decent correction in the US Dollar amid hopes of a breakthrough in the US-Iran negotiations has also hurt the USD/INR pair. During the press time, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, trades 0.3% lower to near 99.00. Lower oil prices and hopes of the US-Iran resolution have diminished US Dollar’s safe-haven appeal and hawkish Federal Reserve (Fed) prospects for the year.

According to the CME FedWatch tool, the odds of the Fed delivering at least one interest rate hike this year are almost 57%, down from 67% recorded on Friday.

Technical Analysis: USD/INR could slide towards 95 if fails to hold 20-day EMA

USD/INR trades weakly at around 95.20 during the day. There has been a mean-reversion move in the pair toward the 20-day exponential moving average (EMA), which is at 95.3719, after a strong rally.

The Relative Strength Index (RSI) around 53 suggests neutral-to-slightly positive momentum, hinting that buyers still retain a modest edge while price action stabilizes above short-term trend support.

On the downside, the pair could slide toward 95.00 if it fails to hold the intraday low at 95.20. A downside move below 95.00 would open the door for further correction toward 94.00. Looking up, the pair needs to recover above the May 22 high at 96.37 to ease the downside pressure; and it could return toward 97.00 if it manages to do so.

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