The Indian rupee rose against the US dollar on Wednesday after a market holiday. USD/INR fell to about 93.20 as oil prices dropped and risk appetite improved on expectations of a US–Iran ceasefire.
Donald Trump said the war with Iran was “very close to being over”. He also said US and Iran teams could resume talks in Pakistan within the next two days.
The US Dollar Index (DXY) edged up to about 98.15, near its almost seven-week low of 98.00. WTI fell below $90.00 on hopes a truce could ease supply strains.
In April, Foreign Institutional Investors were net sellers on seven of eight trading days. They reduced holdings by Rs. 40,955.81 crore, including Rs. 5,834.25 crore since April 7 midnight, about one-fifth of the first week’s amount.
India’s March WPI inflation was 3.88% year-on-year, versus 3% expected and 2.13% previously. USD/INR traded near 93.25, with support at the 20-day EMA around 93.09 and a possible move to 92.29 if it closes below.
Looking back to this time in April 2025, we saw the rupee strengthen significantly on hopes of a US-Iran ceasefire and falling oil prices. The USD/INR pair was trading near 93.20, a level that seems distant from today’s rate of around 83.35. This shows how quickly geopolitical news can shift currency valuations, a key lesson for positioning in the coming weeks.
Last year, crude oil sliding below $90 a barrel was a major boost for the rupee. Today, with Brent crude hovering around a similar level of $87, the downward pressure on oil is less pronounced, removing a major tailwind the rupee enjoyed previously. Traders should monitor OPEC+ output decisions closely, as any surprise production cuts could quickly erase the benefits of stable oil prices for the Indian currency.
The global strength of the US dollar presents a different picture now compared to April 2025. At that time, the US Dollar Index (DXY) was nearing a seven-week low around 98.00, but today it is much stronger, trading firmly above 106. This broad-based dollar strength creates a significant headwind for the rupee, suggesting that any gains may be limited and hard-fought.
Investor sentiment has also shifted dramatically from the heavy selling we saw from Foreign Institutional Investors (FIIs) in early April 2025. Recent data shows Foreign Portfolio Investors (FPIs) have been net purchasers of Indian equities, injecting over $3.5 billion in the first quarter of 2026. This consistent inflow is a key pillar of support for the rupee, providing a buffer against external pressures.
Last year’s WPI inflation of 3.88% is lower than the current consumer inflation figures, which are holding just under 5% and keeping the Reserve Bank of India cautious. This persistent inflation means the RBI is unlikely to cut interest rates soon, making the rupee attractive for carry trades. Derivative traders should factor in this supportive interest rate differential, which was less of a theme in 2025.
Given these factors, a range-bound strategy may be most prudent for the USD/INR pair in the near term. The strong dollar and firm oil prices cap the rupee’s upside, while strong FPI inflows and a hawkish RBI provide a solid floor. Selling out-of-the-money call and put options to capitalize on expected low volatility in the 83.00 to 83.80 range could be a viable approach.
