USD/INR begins the week on a positive note as unsuccessful US-Iran negotiations drive oil prices higher

Indian Rupee Weakens Sharply as USD/INR Surges Amid Strait of Hormuz Blockade

At the start of the week, the Indian Rupee (INR) experienced a significant decline against the US Dollar (USD), with the USD/INR pair climbing close to 93.35. This drop in the Rupee’s value is largely attributed to soaring oil prices, following the United States Navy’s enforcement of a full blockade on the Strait of Hormuz—a crucial route for nearly 20% of the world’s energy shipments—under orders from President Donald Trump.

Countries like India, which are heavily dependent on imported oil to satisfy their energy requirements, often see their currencies come under pressure when global oil prices rise sharply.

Strait of Hormuz Blockade Announced by Trump

President Trump revealed via Truth Social that he had directed the US Navy to impose a comprehensive blockade on Iranian ports. This action comes as a retaliatory measure after peace negotiations with Iran broke down.

Trump stated, “Effective immediately, the United States Navy, the Finest in the World, will begin the process of BLOCKADING any and all ships trying to enter, or leave, the Strait of Hormuz.” He further added, “I have also instructed our Navy to seek and interdict every vessel in International Waters that has paid a toll to Iran. No one who pays an illegal toll will have safe passage on the high seas.”

Following this directive, US Central Command (CENTCOM) confirmed that all maritime traffic to and from Iranian ports would be blocked starting Monday at 10 AM ET (14:00 GMT).

According to Trump’s post, talks for a lasting ceasefire in the Middle East failed because Iran refused to abandon its nuclear program. As the week begins, WTI crude oil is trading near $97.00 per barrel.

Stronger US Dollar Lifts USD/INR Further

Escalating tensions between the US and Iran have increased demand for the US Dollar as a safe-haven asset. The US Dollar Index (DXY), which measures the currency against a basket of six major peers, has risen by 0.3% to approach 99.00.

Besides the risk-averse mood, expectations that persistently high oil prices will prompt the Federal Reserve to keep interest rates elevated have also contributed to the Dollar’s strength. The outlook for oil remains a key factor.

In a recent Fox Business interview, President Trump acknowledged that gasoline prices might stay high through the November elections, a stance that contrasts with his earlier claims that energy price spikes from Middle East conflicts would be short-lived. This shift has raised concerns about inflation expectations becoming unanchored.

When asked if oil and gas prices would decrease before the midterm elections—which are anticipated to be challenging for Republicans—Trump replied, “I hope so, I mean, I think so. It could be, it could be, or the same, or maybe a little bit higher,” as reported by The Daily Beast.

USD/INR Technical Outlook: Pair Climbs Above 20-Day EMA

On Monday, USD/INR moved higher to around 93.40, reclaiming its position above the 20-day exponential moving average (EMA) at 92.96. This shift signals a short-term bullish trend, though the absence of nearby resistance levels suggests a more balanced overall outlook.

The Relative Strength Index (RSI) stands at 56.41, indicating neutral momentum as the currency pair consolidates after its recent gains rather than showing strong bullish acceleration.

• Support: The 20-day EMA at 92.96 serves as the first significant support. A daily close below this level could open the way to the next support area near 92.43.
• Resistance: On the upside, the pair may target 94.00, with a potential move toward the all-time high of 95.14 if that level is surpassed.

(This technical analysis was generated with the assistance of an AI tool.)