Rupee hits four-week low below 94; is this the start of a bigger slide?

USD vs INR: The Indian rupee weakened further on Friday and slipped to around 94.2 against the US dollar, touching its lowest level in nearly four weeks as rising crude oil prices, a stronger dollar index, and global geopolitical uncertainty hurt investor sentiment.

The domestic currency has now fallen for five straight sessions. It is down around 1.3 per cent this week, pulling back sharply from its recent high near 92.5, raising concerns over whether the rupee may see a deeper slide in the coming days.

Market experts said the latest weakness in the rupee is mainly linked to gains in the US dollar, rising US bond yields, and fears over the US-Iran peace talks, which have pushed crude oil prices higher.

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Why is the rupee falling?

Manoj Kumar Jain, Director and Head of Commodity and Currency Research at Prithvi Finmart Private Limited, said the dollar index remained firm in a highly volatile global session.

“The dollar index settled on a positive note at 98.650 with a gain of 0.23 per cent on Thursday. The USD-INR 28 April futures contract also settled higher at 94.0875 with a gain of 0.33 per cent on the National Stock Exchange,” he said.

According to Jain, uncertainty around the US-Iran peace deal has increased concerns over crude oil supply disruptions, especially around the Strait of Hormuz. This has lifted crude oil prices and strengthened the dollar.

He added that the US 10-year bond yield crossing 4.30 per cent also supported the greenback, putting further pressure on emerging market currencies like the rupee.

At the same time, domestic equity markets have also seen pressure due to inflation concerns, which added to weakness in the local currency.

“Gains in crude oil prices and uncertainty on the US-Iran peace deal pushed the rupee lower. Domestic equity markets also plunged amid inflation fears and also pushed the rupee lower,” Jain said.

Can the rupee fall further?

Jain expects the rupee to remain volatile in the near term as global financial markets continue to react to geopolitical tensions and fluctuations in crude prices.

He said the USD-INR pair is likely to trade in the range of 93.45 to 94.70 in the current session.

This means the rupee could remain under pressure unless there is a clear improvement in global risk sentiment or a sharp correction in oil prices.

Technical view remains cautious

From a technical perspective, analysts believe the rupee still shows signs of weakness after the USD-INR pair crossed the key 94 level.

Jain said the USD-INR 28 April futures contract is trading above its moving average trend-line support of 93.31, while the Relative Strength Index (RSI) is above 60, indicating strength in the dollar against the rupee.

The MACD indicator is also showing a positive crossover, which suggests bullish momentum for the dollar.

Support for the pair is seen at 93.80 to 93.45, while resistance is placed at 94.40 to 94.70.

He advised traders to book profits in long positions and wait for corrective dips before taking fresh long bets.

What should investors watch now?

Amit Pabari, Managing Director at CR Forex Advisors, said the break above 94 confirms that the rupee is facing depreciation pressure, but he does not expect a sharp one-way fall immediately.

“Technically, the break above 94.00 confirms an underlying depreciation bias. However, rather than extending sharply, the rupee is likely to pause and consolidate,” he said.

Pabari expects the rupee to trade in a near-term range of 93.50 to 94.50 over the next nine to ten days.

He said the broader direction will depend on global developments, especially movement in crude oil prices, US bond yields, and any progress in the US-Iran talks.