• The Indian Rupee opens slightly higher, following the RBI’s intervention.
• Fears of further decline in the global oil supply would keep INR’s upside limited.
• Easing hawkish Fed bets will likely keep the US Dollar under pressure.

The Indian Rupee (INR) opens marginally higher against the US Dollar (USD) while entering the weekend. The USD/INR pair ticks down to near 96.30 as the Indian currency rises, following Reserve Bank of India’s intervention.

According to a Reuters report, the Indian central bank likely intervened to limit the Indian Rupee's fall. The report also showed that the central bank has been intervening almost daily in ​both the spot and non-deliverable forward markets to support the currency; however, the ​scale of intervention has been relatively measured considering the intensity of the pressure on the rupee.

However, the support regained by the Indian currency after underperforming the entire week could prove to be short-lived amid fears of further escalation in global energy supply disruption.

In the opening trade, the MCX Crude Oil contract expiring on July 20 is up 1.16% to near Rs. 7,700, close to its monthly high of Rs. 7,832 posted on Tuesday.

Currencies from economies, such as India, which rely heavily on oil imports to meet their energy needs, tend to underperform in a high-oil-price environment.

Iran threatens the closure of Red Sea if US attacks Iranian infrastructure

Earlier in the day, Iran asked Yemen’s Houthi militia to stand ready to close the Red Sea oil route if the United States (US) strikes Iranian power infrastructure, Reuters reported. Such a scenario would trim the already-low global oil supply, which could further accelerate fears of high inflation globally.

The threat from Iran is a response to remarks from US President Donald Trump, in an interview with Fox News, in which he said that military forces would be authorized to attack Iranian bridges and power plants if the nation doesn’t come to the table for negotiations.

US Dollar gains on risk-off mood

An improvement in the demand for safe-haven assets amid intensifying military aggression between the US and Iran has boosted the appeal of the US Dollar. At press time, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, trades 0.1% higher to near 100.80.

However, the Greenback will likely conclude the week on a negative note, as traders have trimmed Federal Reserve (Fed) interest rate hike bets, following the release of the soft US Consumer Price Index (CPI) report of June on Tuesday.

According to the CME FedWatch tool, the odds of the Fed delivering an interest rate hike in the meeting later this month have dropped significantly to 10.2% from 24.6% recorded a week ago.

India's growth fundamentals remain strong despite headwinds

Earlier in the day, RBI Governor Sanjay Malhotra said in an interview with Doordarshan that India's fundamentals remain strong, and the economic expansion will remain intact at a higher pace despite geopolitical tensions. RBI's Malhotra warned that ongoing tensions in the Middle East and the prospects of a weak monsoon season are seen as key risks for the economy.

Technical Analysis: USD/INR holds firmly above 20-day EMA

USD/INR trades at around 96.30, maintaining a bullish near-term bias as it holds above the 20-day Exponential Moving Average (EMA) at 95.55. The pair extends its advance after reclaiming the short-term trend indicator, while the Relative Strength Index (14) at 62.99 stays in positive territory, hinting that upside momentum remains constructive but not yet overbought.

On the downside, immediate support is seen at the 20-day EMA at 95.55, which reinforces the underlying bullish structure as long as it holds. Looking up, the all-time high at around 97.10 will be the key barrier for the pair.

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

Economic Indicator

Consumer Price Index (YoY)

Inflationary or deflationary tendencies are measured by periodically summing the prices of a basket of representative goods and services and presenting the data as The Consumer Price Index (CPI). CPI data is compiled on a monthly basis and released by the US Department of Labor Statistics. The YoY reading compares the prices of goods in the reference month to the same month a year earlier.The CPI is a key indicator to measure inflation and changes in purchasing trends. Generally speaking, a high reading is seen as bullish for the US Dollar (USD), while a low reading is seen as bearish.

The US Federal Reserve (Fed) has a dual mandate of maintaining price stability and maximum employment. According to such mandate, inflation should be at around 2% YoY and has become the weakest pillar of the central bank’s directive ever since the world suffered a pandemic, which extends to these days. Price pressures keep rising amid supply-chain issues and bottlenecks, with the Consumer Price Index (CPI) hanging at multi-decade highs. The Fed has already taken measures to tame inflation and is expected to maintain an aggressive stance in the foreseeable future.

Sagar Dua is associated with the financial markets from his college days. Along with pursuing post-graduation in Commerce in 2014, he started his markets training with chart analysis.