Indian Rupee falls back against US Dollar as oil prices rebound

The Indian Rupee hits a roadblock after a four-day rally against the US Dollar.
US forces launched “self-defense strikes” on Iranian vessels for deploying mines.
India’s FM Sitharaman assures she will take suggestions regarding higher capital gains taxes.

Sagar Dua FXStreet

The Indian Rupee’s (INR) rally against the US Dollar (USD) hits a pause after a four-day winning streak on Tuesday. The USD/INR pair rebounds to near 95.45 as the recovery move in oil prices amid fears that the United States (US)-Iran negotiations could face a setback, following Washington’s attacks on Iranian missile sites, has prompted caution among market participants.

As of writing, the WTI Oil price trades 1.5% higher to near $91.00. Currencies from economies, such as India, which rely heavily on oil imports to meet their energy needs, face pressure if oil prices rise.

US forces confirmed that strikes against Iran were "defensive"

On Monday, the US Central Command said that it ‌conducted strikes in southern Iran, which were aimed at missile launch sites and Iranian vessels aiming to deploy mines, while clarifying that the nature of the strikes was “defensive” and not meant to end the ceasefire with Tehran.

Meanwhile, US President Donald Trump continues to express confidence that negotiations with Iran towards a permanent resolution are going very well. Trump said on Monday that negotiations toward a deal with Iran to end their conflict and reopen the Strait of Hormuz were "proceeding nicely, Bloomberg reported.

In the past few days, the Indian Rupee gained significantly on hopes of an early breakthrough in the US-Iran negotiations, which led to a sharp decline in oil prices.

India's FM Sitharaman assures to look after Capital Gains Tax

Speaking to reporters on the sidelines of the TEXPROCIL Export Awards Event on Monday, India’s Finance Minister (FM) Nirmala Sitharaman said that the centre will take suggestions from investors regarding higher Short-Term Capital Gains (STCG) and Long-Term Capital Gains (LTCG) taxes. "On this specific issue, and on any issue, we are always ready and willing to listen to the people. We will certainly take their inputs,” Sitharaman said, ANI reported.

Market experts believe that higher LTCG and STCG taxes charged by the Indian government in comparison with other nations make India a less attractive investment avenue for foreign investors.

FIIs turned out net buyers on Monday

Foreign Institutional Investors (FIIs) turned out to be net buyers in the Indian stock market on Monday after remaining net sellers in all the last four trading days. However, the amount invested by overseas investors was very low against the average selling seen during the May 19-22 period. On Monday, FIIs bought shares worth Rs. 821.75 crore, significantly lower than the four-day average selling of Rs. 2,596.63 crore.

Technical Analysis: USD/INR recovers after four-day losing streak

USD/INR trades marginally higher at around 95.45 in India's late trading hours on Tuesday. The near-term tone of the pair is uncertain as it wobbles around the 20-day exponential moving average (EMA), which is at 95.37.

The Relative Strength Index (RSI) cools down to 54 after failing to hold overbought levels, indicating the conclusion of the positive momentum; however, the bullish bias remains intact.

Looking down, the pair could slide to 95.00 if it fails to hold the 20-day EMA. As long as USD/INR trades above this moving average, dips are likely to find buyers, keeping the near-term bias tilted to the upside. On the upside, the pair would attempt to return to the all-time high around 97.00 if it manages to recover above the May 22 high at 96.37.

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

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.

GBP/USD revisits 1.3530; Dollar pushes harder

GBP/USD adds to the weekly correction and recedes toward the 1.3530 zone on Friday. Indeed, Cable faces increasing selling pressure on the back of extra gains in the Greenback, particularly fuelled by Chair Warsh’s speech at the Jackson Hole Symposium and the US NFP Annual Revision (-79K).

EUR/USD breaches below 1.1600, multi-day lows

EUR/USD now accelerates its decline and retreats to seven-day troughs in the sub-1.1600 region at the end of the week. The pair’s pullback comes on the back of the strong rebound in the US Dollar after Chair Warsh delivered a hawkish message in Jackson Hole, while the US NFP Annual Revision came in at -79K.

Gold challenges its 200-day SMA near $4,530

Gold’s decline gathers fresh steam, hitting weekly lows while disputing its critical 200-day SMA near $4,530 per troy ounce. The yellow metal’s increasing weakness comes in response to the generalised upbeat tone in the US Dollar and the widespread rebound in US Treasury yields, as investors continue to reprice a Fed rate hike in September.

Week ahead: RBNZ and BoC decide on rates ahead of all-important US NFP

The US dollar staged a modest recovery this week, perhaps as traders decided to cover some of their short positions amid slightly stickier or in-line US PCE inflation numbers for July, confounding expectations of softer prints amid the softness revealed in the CPI data for the month.

CFTC Report: CAD short covering leads; Gold buying surges

The week in one sentence: speculative positioning shifted more constructively in the week to August 25. CAD short covering led the move, followed by a broad reduction in EUR shorts and renewed Gold buying. GBP and VIX positioning also improved, while JPY positioning deteriorated and WTI flows diverged from weaker prices.

Diesel’s record $100 warning: The oil shock hiding in plain sight

The Oil market may look calmer than it did a few months ago, but diesel is sending a very different message. The US diesel crack spread, the premium of ultra-low sulphur diesel futures over WTI, recently surged above $100 per barrel for the first time, reaching an intraday record of just over $102.00.