USD/INR eased towards 93.00 on Tuesday as the Indian Rupee firmed slightly against the US Dollar. Trading was expected to stay range-bound ahead of Donald Trump’s deadline for Iran to reopen the Strait of Hormuz at 08:00 PM ET on Tuesday (05:30 AM IST on Wednesday).
Trump said the US would bomb Iranian power plants and bridges if the strait is not reopened by the deadline. Iran issued threats of reciprocal action against US infrastructure in the region and its allies.
Market Focus Shifts Quickly
Markets have focused on the risk of higher oil prices, which can weigh on the Rupee because India meets about 88%–89% of its domestic energy needs through oil imports. Foreign Institutional Investors sold Indian equities worth Rs. 26,429.45 crore over the first three trading days of April.
Attention now turns to Wednesday’s RBI policy decision, with the Repo Rate expected to remain at 5.25%. The US will release the Fed’s March meeting minutes late Wednesday, after rates were kept at 3.50%–3.75%.
Technically, USD/INR traded near the 20-day EMA at 92.95, with support at 92.35 then 91.35, and resistance at 93.66 then 95.22. The 14-day RSI moved into the 40.00–60.00 range from above 60.00.
Looking back at this time in 2025, we recall the USD/INR pair facing intense pressure near 93.00 due to the standoff between the US and Iran over the Strait of Hormuz. This geopolitical risk premium has since evaporated, with the pair currently trading much lower around 85.50. This stark difference shows how quickly market focus can shift once a major threat is averted.
The primary fear then was a spike in oil prices, a persistent vulnerability for India, which still imports roughly 85% of its crude oil needs. Today, with Brent crude hovering around $95 per barrel, this sensitivity remains a key factor for the rupee’s stability. Traders should consider using call options to hedge against any sudden geopolitical flare-ups that could send energy prices soaring again.
Policy Flows And Hedging Strategy
We saw foreign institutional investors panic-sell Indian equities in early April 2025, offloading over Rs. 26,400 crore in just three days. In contrast, recent NSDL data shows FIIs have been net buyers this quarter, pumping over $4 billion into the equity markets so far in 2026. This sustained inflow provides a strong fundamental support for the rupee that was absent last year.
Central bank policy has also evolved significantly from the scenario a year ago, when the RBI’s repo rate was 5.25% and the Fed’s was at 3.75%. The RBI is now maintaining a rate of 6.50%, while the Fed holds steady near 5.00%, creating a more favorable interest rate differential for India. This gap makes holding the rupee more attractive than it was during the 2025 tensions.
Given the memory of last year’s volatility, buying short-term USD/INR call options with a strike price around 86.50 offers a cost-effective hedge against unforeseen shocks. However, with stronger fundamentals this year, selling puts below the 84.50 level could be a viable strategy to earn premium. This approach bets on the rupee’s current stability and the unlikelihood of a repeat of last year’s extreme risk aversion.
