HomeNewsUSD/INR: Oil Slump Steadies Indian Rupee
USD/INR: Oil Slump Steadies Indian Rupee

USD/INR: Oil Slump Steadies Indian Rupee

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USD/INR snapped a four-day winning streak on Wednesday as the Indian rupee strengthened on the back of crashing crude oil prices.

West Texas Intermediate (WTI) crude oil slid 5.70% on Wednesday, to a 7-month low of $81.75 per barrel. The slide extends upon recent losses, which has seen oil fall almost 40% from the $130 high caused when Russia invaded Ukraine.

Oil’s losses follow the API inventory data on Wednesday which showed US crude stocks rose for the first-time in four weeks. US Stockpiles increased by 3.645 million barrels, almost 4 million barrels more than forecast. The surprise build wrong-footed the market, triggering heavy selling.

Whilst the inventory data punished the crude oil longs, it was welcome news for the rupee. Aside from the US dollar’s relative strength, high oil prices have been a main contributor to the rupee’s weakness this year. The rising cost of energy, twinned with a strong dollar has widened India’s trade deficit in recent months. In turn USD/INR has threatened to break above the 80.00 level several times since July.

The weakness has drawn a response from the Reserve Bank of India (RBA), which has intervened, at great cost, to stabilize the national currency. Subsequently, the 80.00 level appears to be the line in the sand for the RBA. Thankfully, for the central bank, the rupee is showing signs that the worst may be over for now.

US Dollar to Indian Rupee Forecast

USD/INR’s price action over the last two months has formed an interesting pattern on the daily chart. We see a clear horizontal resistance level just above 80.00. Countering the resistance, a rising trend line meets with the 50-Day Moving Average (DMA) at 79.55 (green line).

This confluent support is currently proving a robust floor under the USD/INR pair. However, a close below 79.55 should encourage USD selling and INR buying. In this event, a slide towards the 100-DMA at 78.55 is probable.

However, later today, a raft of data from the US could derail the bearish forecast. Traders will first be eying FOMC chair Jerome Powell’s speech for clues on future monetary policy. And whilst Powell’s words will undoubtedly have implications for the US dollar to Indian rupee exchange rate, the EIA crude oil inventories announced later, could be the deciding factor.

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USD/INR Price Chart

Elliot Laybourne
Elliott is a former investment banker with a 20 year career in the city of London. During this time he held senior roles at ABN Amro, Societe Generale, Marex Financial and Natixis bank, specialising in commodity derivatives and options market-making. During this time, Elliott’s client list included Goldman Sachs, JP Morgan, Credit Suisse, Schroders Asset Management, and the Pennsylvania State Public School Employees Retirement System, amongst others. Today, he splits his time between Thailand and Dubai, from where he provides trading consultancy and business development services for family office and brokerage clientele.