Indian Rupee stays calm as investors await RBI's policy decision

The Indian Rupee (INR) trades flat against the US Dollar (USD) on Thursday after a strong Wednesday. The USD/INR pair holds onto the previous day’s gains around 95.72 even as the Indian administration decides to scrap capital gains tax on overseas investment in government bonds.

India approves scrapping capital gains tax on foreign investment in government bonds

Earlier in the day, the Cabinet meeting had approved the scrapping of capital gains tax on foreign portfolio investment in government bonds, aiming to improve the condition of foreign flows in the Indian economy.

The move was highly anticipated by the Indian government as significant Foreign Institutional Investors (FIIs) selling in the Indian stock market has been one of the key reasons behind the Indian Rupee’s sharp depreciation.

On Monday, FIIs also remained net sellers in the Indian equity markets, offloading their stake worth Rs. 5,616.56 crore. So far in June, overseas investors have remained net sellers in all three trading days.

Trump confirms Iran Ayatollah's involvement in negotiations

US President Donald Trump said in The New York Post’s "Pod Force One" program on Wednesday that Iran has agreed not to have nuclear weapons, adding, “Iran's Ayatollah [referring to Supreme Leader Mojtaba Khamenei] is involved in negotiations with Washington” and he will meet him at some time. However, Trump warned that Iran could change its mind and pursue its nuclear ambitions.

When asked about the timeframe in which the US and Iran could reach a deal, Trump said a memorandum of understanding (MoU) between the nations could reopen the Strait of Hormuz as early as this week; however, there is a possibility that the US blockade on Iranian sea ports could last till Labor Day, September 7.

If the US-Iran negotiations fail to reach a breakthrough, oil prices would remain higher, and act as a major hurdle for the Indian Rupee.

In India's afternoon trading hours, MCX Crude Oil price opens 1.2% lower to near 9,120, but is close to its 10-day high of 9,290 posted on Wednesday.

Currencies from economies, such as India, which rely heavily on oil imports to meet their energy needs, tend to underperform in a high oil price environment.

RBI’s policy and US NFP data awaited

Going forward, the major trigger for the Indian Rupee will be the Reserve Bank of India’s (RBI) monetary policy, which will be announced on Friday. The RBI is expected to hold the Repo Rate steady at 5.25% and guide a hawkish monetary policy outlook, as higher energy prices have de-anchored inflation expectations.

In the US, investors will pay close attention to the Nonfarm Payrolls (NFP) data for May, which will be released on Friday. The impact of the US NFP data will be significant on the Federal Reserve’s (Fed) monetary policy outlook.

Technical Analysis: USD/INR flattens around 95.70

USD/INR trades almost flat at around 95.72 on Thursday. The pair maintains a modest bullish bias as it stays above the 20-day Exponential Moving Average (EMA) at 95.47. The price action consolidates near recent highs while the Relative Strength Index (RSI) at about 54.8 sits slightly above the neutral territory, suggesting steady but not overextended upward momentum.

On the downside, immediate support is aligned with the 20-day EMA around 95.47, which reinforces the underlying demand zone and would need to give way to signal a deeper corrective phase towards the June 2 low at 95.00, followed by the May 7 low at around 94.00. Looking up, the pair could reclaim the all-time high of 97.09 if it manages to rise above the May 28 high at 96.65.

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