USD vs INR: Rupee logs steepest fall in over a month; what’s triggering the sharp decline?

USD vs INR: The Indian rupee suffered its steepest single-day fall in more than a month on Monday, ending at its weakest closing level on record as surging crude oil prices triggered a sharp selloff in domestic financial markets after US President Donald Trump rejected Iran’s response to a US-backed peace proposal.

The domestic currency declined nearly 0.9 per cent to close at 95.31 against the US dollar, marking its sharpest daily fall since March 27. The rupee weakened in line with other Asian currencies as investors rushed towards safe-haven assets amid escalating geopolitical tensions in West Asia and fears of prolonged disruptions in global energy supplies.

Why rupee is falling

The sharp decline in the rupee followed a steep jump in global crude oil prices. Brent crude rose around 2.5 per cent to $103.8 per barrel after shipping activity through the Strait of Hormuz remained severely disrupted. The strategic waterway handles nearly one-fifth of global oil and liquefied natural gas shipments, making it one of the world’s most critical energy routes.

Higher crude oil prices are seen as negative for India because the country imports the majority of its energy requirements. A sustained rise in oil prices increases the import bill, widens the current account deficit, and puts additional pressure on inflation and the rupee.

The surge in oil prices also triggered broad-based selling across Indian financial markets. Benchmark equity indices Sensex and Nifty 50 fell around 1.5 per cent during Monday’s session as investors reduced exposure to risk assets amid concerns over rising inflation and slowing economic momentum.

Government bonds also came under pressure, with the yield on the benchmark 10-year government security rising nearly 6 basis points. Rising bond yields generally reflect concerns around inflationary pressures and tighter financial conditions.

Modi calls for fuel conservation

Over the weekend, Narendra Modi reportedly urged several measures aimed at reducing pressure on India’s foreign exchange reserves and energy imports as crude prices continued to surge globally.

The Prime Minister called for fuel conservation, lower imports, and reduced travel wherever possible to minimise the economic impact of higher energy costs. The comments came at a time when policymakers are closely monitoring the impact of geopolitical tensions on India’s macroeconomic stability.

Currency traders said the Reserve Bank of India (RBI) may continue intervening intermittently in the foreign exchange market to prevent excessive volatility in the rupee if crude oil prices remain elevated.

Key support zone near 93.50

Amit Pabari, Managing Director at CR Forex Advisors, said the 93.50–93.80 zone is likely to act as a strong support area for the USD/INR pair.

“However, appreciation may remain limited because lower levels could attract RBI dollar buying, similar to what was seen earlier this year after the trade deal announcement,” Pabari said.

He added that the 95.30–95.50 range is expected to remain a strong resistance zone for the currency pair in the near term.

Rupee likely to remain volatile

Manoj Kumar Jain, Director at Prithvi Finmart, said the rupee is likely to remain volatile this week amid fluctuations in the dollar index, weakness in domestic equities, and ongoing geopolitical tensions.

“We expect the rupee to remain volatile this week amid volatility in the dollar index, domestic equity markets, and geopolitical tensions. The USD/INR pair could trade in the range of 93.55–96.20,” Jain said.

On the technical front, Jain said the USD/INR May futures contract has rebounded from lower levels, although momentum indicators continue to remain mixed.

According to him, the pair is trading below its moving average trend-line support level of 94.84, while the Relative Strength Index (RSI) remains above the 50 mark. He added that the Moving Average Convergence Divergence (MACD) indicator is showing a negative crossover on daily charts.

Jain said immediate support for the pair is placed around 94.45–94.08, while resistance is seen near 95.05–95.40 levels.