The Indian Rupee (INR) has fallen to a record low against the US Dollar (USD), with the USD/INR pair reaching 95.15 in afternoon trading on Friday. This decline reflects heightened market caution following uncertainty surrounding peace talks between the United States and Iran, which have not yet resolved the ongoing conflict in the Middle East.
Middle East Uncertainty Dampens Market Sentiment
Investor confidence remains fragile as conflicting statements from US President Donald Trump and Iranian officials continue to fuel speculation. While Trump claimed that negotiations with Tehran are progressing well, Iranian representatives have not confirmed these claims, casting doubt on the likelihood of a swift resolution. Recent developments, including Trump’s announcement to delay military strikes on Iran’s energy infrastructure for 10 days, have added further ambiguity.
Analysts note that mediators involved in peace talks have dismissed reports of an Iranian request for the strike pause, emphasizing that Iran has not yet finalized its response to Trump’s proposed terms. These conditions include opening the Strait of Hormuz and abandoning missile programs, which are viewed as unlikely concessions by Tehran.
Foreign Institutional Investors Accelerate Sell-Off
The uncertainty surrounding Middle East diplomacy has intensified risk aversion among investors, prompting Foreign Institutional Investors (FII) to continue selling Indian equities. In March alone, FIIs have offloaded assets worth Rs. 1,07,009.53 crore, maintaining a net-selling trend across all trading days. This outflow is exacerbating pressure on the rupee, which has been further weakened by broader global market trends.
Meanwhile, the US Dollar Index (DXY) has risen to a three-day high of 100.00, driven by growing expectations of interest rate hikes from the Federal Reserve. Traders now anticipate a 52% chance of at least one rate increase this year, marking a sharp shift from earlier forecasts of cuts amid war-related volatility.
Reserve Bank of India Maintains Rate Stability
The Reserve Bank of India (RBI) is expected to keep interest rates unchanged in its April 8 monetary policy meeting. A Reuters poll indicates that inflation expectations have diverged from previous benchmarks due to rising energy prices, though policymakers remain committed to maintaining stability until at least mid-2027.
Technical Analysis: USD/INR Faces Further Upside Pressure
The USD/INR pair has surged above 95.00, with technical indicators suggesting continued bullish momentum. The 20-day Exponential Moving Average (EMA) now lies below the current price level, supporting further gains. While the Relative Strength Index (RSI) at 76.54 indicates overbought conditions, it also highlights strong buying pressure that could sustain the rally.
Key support levels for USD/INR are currently at 93.90 and 93.06, with a deeper pullback potentially testing 92.39. If the trend continues, the pair may target 96.00 as its next psychological milestone.
