Ahead of the Fed’s Monetary Policy, the Indian Rupee Faces Pressure

• The Indian Rupee weakens against the US Dollar as markets await the Fed’s policy decision.
• Interest rates are expected to remain unchanged at the Fed’s meeting.
• The rise in oil prices has put pressure on the Indian Rupee.

The Indian Rupee (INR) slips into marginal losses against the US Dollar (USD) on Wednesday, surrendering its early gains. With the Indian currency weighed down by recovering oil prices and caution before the Federal Reserve’s (Fed) monetary policy decision, USD/INR edges higher towards 95.16.

Early trading sees the MCX Crude Oil contract due to expire on November 19 climb 1.82% to around Rs. 9,671, approaching its recent highs of Rs. 9,828.

For economies heavily reliant on imported oil to meet energy requirements, including India, rising crude prices are adverse for their currencies.

Why Are Oil Prices Rising After the Houthi Attack on Saudi’s Largest Refinery?

According to Reuters, a military spokesperson for Yemen’s Iran-aligned Houthis said on Tuesday that the group had fired a ballistic missile towards the Ras Tanura oil refinery in eastern Saudi Arabia, the kingdom’s largest refinery, the news agency reported.

By intensifying concerns about a further escalation in energy supply risks, the attack has driven oil prices higher.

United States (US) Treasury yields have also found support from the oil price increase, reducing the attraction of riskier currencies such as the Indian Rupee. At the time of writing, the 10-year US bond yield has risen 0.46% to around 5.02%.

What Can Markets Expect From the Fed’s Policy Decision?

Global markets will look to the Fed’s monetary policy decision later in the day as their main catalyst. The CME FedWatch tool indicates expectations that interest rates will be held in the 3.75%-4.00% range.

Having raised interest rates by a quarter of a percentage point at its September policy meeting, the Fed indicated through its dot plot that at least one further increase would follow this year.

Markets initially emerged from the September announcement confident of another Fed rate hike in October. Those hawkish bets were subsequently scaled back, however, as several policymakers indicated that a further increase was not urgent.

Can Waller’s Call for Slower but Further Hikes Keep Dollar Bulls Alert?

A clear preference for further tightening emerged from Fed’s Waller, whose distinctly hawkish remarks earned an FXS Speechtracker score of 8/10, above the historical average of 7.2/10. His assertion that “more hikes [are] needed”, coupled with the qualification that they “do not need to come at consecutive meetings”, points to a higher terminal rate reached through a more flexible policy path. For the Dollar, the support comes from expectations that restrictive policy will last longer, rather than from a rapid sequence of near-term increases. Waller’s focus on persistent inflation drivers, including AI-related investment, continuing energy shocks and a labour market that remains “solid and stable”, highlights the risk of inflation expectations becoming unanchored after nearly 5½ years of above-target inflation. This leaves the policy bias firmly hawkish.

Following a 0.42-point increase, the FXS Fed Sentiment Index reached 138.34, indicating that the speech shifted the policy tone further into hawkish territory and well beyond the neutral 100 level. Alongside the above-baseline FXS Speechtracker reading, this elevated index should support the Dollar as markets factor in an extended period of restrictive rates, even if hikes do not occur at successive meetings.

USD/INR Technical Analysis: Can the Pair Reclaim Its EMA?

A near-term bearish bias persists on the daily chart, where USD/INR is trading at 95.1355, below the 20-period exponential moving average (EMA) of 95.3253. Failure to recover this short-term EMA indicates that rallies continue to attract selling. Meanwhile, a Relative Strength Index (RSI) reading of around 44 falls within neutral-to-weak territory, suggesting subdued upward momentum rather than outright oversold conditions.

The 20-day EMA at 95.3253 marks the first resistance on the upside. Only a sustained move above it would relieve immediate downward pressure and create scope for a more substantial recovery. Since the available indicators do not identify clear nearby support levels, price behaviour around this EMA pivot remains central to the outlook. Trading below it is likely to maintain the short-term bearish bias.

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