The Indian rupee opened slightly higher on Thursday, with USD/INR edging down to about 93.28. The US Dollar Index (DXY) fell to a six-week low near 97.85 amid heavy selling of the dollar.
Demand for the dollar eased as hopes rose for a permanent US–Iran ceasefire, reducing safe-haven buying. US President Donald Trump said the war with Tehran is “very close” to over and suggested announcements could come within two days.
USD/INR declines were limited by continued dollar demand from Indian importers. A Reuters report said bankers see limited upside for the rupee due to importer hedging and interest in locking in longer-term dollar liabilities.
Foreign Institutional Investors were net buyers of Indian equities on Wednesday, purchasing Rs. 666.15 crore of shares. In April, they were net buyers on only two trading days, buying Rs. 1,338.24 crore, while selling Rs. 41,627.90 crore on other days.
Markets are watching Israel–Lebanon talks later in the day, alongside a two-week US–Iran ceasefire due to expire on April 21. Tehran previously accused Washington of breaching the truce by continuing attacks on Iran-backed Hezbollah in Lebanon.
USD/INR held above its 20-day EMA at 93.1181, with RSI near 52. Support sits near 93.12, then 92.29, while resistance levels include 94.00 and 95.15.
Looking back to April 2025, we saw the US dollar weaken significantly on hopes of a peace deal in the Middle East, with the Dollar Index falling to around 97.85. Despite this, the USD/INR pair remained stubbornly high near 93.28, held up by strong dollar demand from Indian importers. This disconnect between global dollar weakness and the rupee’s performance was a key feature of the market at that time.
Today, the situation is quite different as the US Dollar Index is much stronger, trading near 106, its highest level in over five months. This strength is driven by persistent inflation data in the US, which has pushed back expectations for Federal Reserve interest rate cuts. This fundamentally changes the global backdrop compared to the environment of a weakening dollar we experienced last year.
Currently, the USD/INR is trading in a tight range around 83.50, a level the Reserve Bank of India appears to be defending. High oil prices, with Brent crude above $90 a barrel, are putting natural pressure on the rupee due to India’s status as a major importer. This creates a tense balance, with RBI intervention preventing the kind of depreciation that current oil and dollar strength might otherwise cause.
A notable similarity to the situation in April 2025 is the behaviour of Foreign Institutional Investors. Just as FIIs were net sellers then, foreign portfolio investors (FPIs) have pulled over Rs 15,500 crore from Indian equities in the first two weeks of April 2026. This consistent outflow signals caution from overseas investors and adds to the underlying pressure on the rupee.
For derivative traders, this environment suggests volatility could be mispriced. With the RBI holding the line but global pressures building, traders could consider strategies like long straddles, which profit from a large price move in either direction, to bet on an eventual breakout from the current tight range. The quiet consolidation may not last, and a break could be sharp when it finally happens.
Given the range-bound action, selling out-of-the-money call and put options to collect premium seems viable, but this requires careful risk management. Last year’s technicals showed the pair holding a key moving average, and today we see it holding a psychological level defended by policy. Importers should continue the 2025 strategy of hedging their USD exposure, as underlying risks for rupee weakness remain firmly in place.
