The USD/INR exchange rate continues its upward momentum, extending its winning streak for the fourth consecutive trading session on Thursday. The pair surged to around 94.15, marking its highest level in over a week, driven by a combination of a strong US Dollar, rising crude oil prices, and weakening sentiment toward the Indian Rupee (INR).
The broader macroeconomic backdrop reflects persistent external pressures on India’s currency, particularly from energy markets, global risk sentiment, and foreign institutional flows.
Meanwhile, domestic economic indicators remain relatively resilient, though insufficient to offset external headwinds. In their article, the team at ArcheInvest delivers a detailed and easy-to-understand explanation of this subject.
Rising Crude Oil Prices Weigh on Indian Rupee
A key driver behind the INR’s depreciation is the sharp rise in global crude oil prices, with WTI crude trading above $93.50 per barrel, up more than 1.5% during the session.
The surge is largely attributed to geopolitical disruptions surrounding the Strait of Hormuz, a vital maritime corridor responsible for transporting nearly 20% of global oil supply. Reports of prolonged closure and escalating tensions in the region have significantly tightened supply expectations.
Economically, this development is critical for India, which is one of the world’s largest net oil importers. Higher crude oil prices typically lead to an increased import bill, a wider current account deficit (CAD), higher inflationary pressures, and reduced currency stability. As a result, the INR remains structurally vulnerable in a high oil price environment, reinforcing the upward trajectory in USD/INR.
Domestic Economic Data Provides Partial Support
On the domestic front, India’s economic activity continues to show resilience. The latest HSBC Composite Purchasing Managers’ Index (PMI) rose to 58.3 in April, up from 57.0 in March, signaling robust expansion in both manufacturing and services sectors.
Breaking it down, the Manufacturing PMI increased to 55.9, while the Services PMI improved to 57.9. A PMI reading above 50 indicates economic expansion, and the current levels suggest that India’s private sector continues to grow at a healthy and sustained pace.
However, despite strong PMI data, the positive impact on the INR remains limited due to dominant external macro pressures such as oil prices and USD strength.
US Dollar Strength Adds Additional Pressure on INR
The US Dollar Index (DXY) remains firm, supported by expectations that higher oil prices could contribute to inflationary pressures in the United States.
Rising energy costs increase the likelihood of a hawkish Federal Reserve (Fed) stance, keeping US interest rates elevated for longer. This strengthens the USD through higher yield differentials, increased safe-haven demand, and reduced expectations of early rate cuts.
In this environment, the USD/INR pair benefits from dual tailwinds: a stronger USD and a weaker INR.
Investors are also awaiting the upcoming US S&P Global PMI data, which is expected to provide further cues on US economic momentum and Fed policy direction.
Technical Analysis: USD/INR Maintains Bullish Structure
From a technical perspective, USD/INR continues to display bullish momentum, trading comfortably above 94.00.
The pair remains supported above the 20-day Exponential Moving Average (EMA) at approximately 93.26, confirming a sustained short-term uptrend.
Key technical indicators show the following: the RSI (Relative Strength Index) is around 58.45, indicating a bullish bias while remaining below overbought levels. The trend structure continues to form higher highs and higher lows, confirming an uptrend. Overall momentum is moderately strong, but not at extreme levels, suggesting room for further movement without immediate exhaustion.
Support levels are currently structured as follows: the immediate support is at 93.26 (20-day EMA), followed by a secondary support at 93.00, and a key downside level at 92.46 (March 3 high). A break below 93.26 could indicate waning bullish momentum and potentially trigger a short-term corrective phase.
On the upside, USD/INR appears positioned to challenge psychological resistance in the 94.50–95.00 range, with a potential retest of all-time highs above 95.00. A sustained breakout above 95.00 could open the door to fresh record highs, contingent on evolving macroeconomic conditions and geopolitical developments.
Outlook: External Risks Dominate Currency Direction
Overall, the outlook for USD/INR remains tilted to the upside in the near term. The combination of high crude oil prices, geopolitical instability in the Strait of Hormuz, sustained FII outflows, and a strong US Dollar environment continues to outweigh domestic economic strength, reinforcing a persistently bullish bias for the pair.
While India’s PMI data signals strong internal growth, external vulnerabilities, particularly energy dependence and capital flows, are driving currency dynamics.
Unless oil prices stabilize or foreign inflows resume meaningfully, the Indian Rupee is likely to remain under pressure, keeping the USD/INR pair on a bullish trajectory in the near term.
