Indian Rupee begins week on a cautious note

• Caution shapes Indian Rupee trading against the US Dollar as the Fed’s policy week begins.
• 3.75%-4.00% is the interest rate range investors expect the Fed to maintain.
• High oil prices remain a source of pressure on the Indian currency.

95.00 is within reach as USD/INR edges higher. The Indian Rupee (INR) starts the week retaining Friday’s losses against the US Dollar (USD), with elevated oil prices weighing on the currency.

Nearly 2% lower at around Rs. 9,612, the MCX Crude Oil contract expiring on 19 November opens with a downward gap on Monday. It nevertheless remains near Friday’s recent highs of Rs. 9,828.

When oil prices are high, currencies of economies heavily reliant on imported oil for their energy needs, such as India, typically underperform.

Oil prices: geopolitical risks sustain elevated levels

TD Securities sees crude prices retaining an upward bias in the near term. Its analysts warn that “we expect crude oil will remain skewed to the upside in the near term as escalation risk ahead of Israeli elections and US midterm elections remains elevated.” The geopolitical premium in current prices is reinforced by their observation that “recent Houthi strikes have seen risk premium pricing in the market increase, while persistent tanker attacks by Iran appear to have been successful in reducing some Hormuz flows,” according to the analysts.

US Dollar weakens as Fed policy week begins

Ahead of Wednesday’s Federal Reserve (Fed) monetary policy announcement, caution is weighing on the US Dollar at the start of the week. Thursday brings preliminary Q3 Gross Domestic Product (GDP) figures and September’s Personal Consumption Expenditures (PCE) Price Index data.

An unchanged policy setting is the forecast from Royal Bank of Canada analysts for this week’s meeting, with the “Fed expected to hold the fed funds target range unchanged on Wednesday after hiking for the first time since 2023 in September.” September’s increase restarted the tightening cycle. However, RBC observes that “FOMC members continue to signal that more hikes will follow, but comments after the last decision suggest a gradual approach.” The bank restates its rate outlook: “we expect two 25-basis-point rate hikes ahead before the end of Q1 2027.”

Q3 earnings from hyperscalers Amazon, Alphabet and Microsoft will also draw close investor scrutiny, alongside the Fed decision and major economic releases.

Hyperscalers’ guidance on Artificial Intelligence (AI) infrastructure spending plans would have a significant bearing on the US Dollar and US Treasury Yields. Substantial debt issuance to finance their AI spending in previous quarters drove a sharp rise in US bond yields.

India’s standing in global markets as an anti-AI trade means guidance on AI spending plans would also materially affect the Indian Rupee.

94.9455: USD/INR Technical Analysis

At 94.9455 on the daily chart, USD/INR retains a bearish near-term bias below its 20-day exponential moving average (EMA) of 95.3456. Following a steep retreat from the recent 96.80 area, the pair faces an immediate ceiling at the EMA on any recovery. A Relative Strength Index (RSI) reading around 39 points to weak but stabilising downside momentum, after the indicator tested oversold territory earlier this month.

The 20-day EMA at 95.3456 provides the first resistance level. A daily close above it would ease prevailing selling pressure and clear a path towards higher levels. On the downside, the RSI reading of 39.62 indicates momentum support. If the oscillator sustains a decline towards the 30 zone, the bearish bias would strengthen, leaving USD/INR vulnerable to further losses below the 95 handle.

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