The Indian rupee opened marginally firmer against the US dollar, with USD\/INR easing towards 95.70 as WTI fell 1.8% to about $90.80, supporting currencies of oil-importing economies. Geopolitical risk remained in focus after Iran said the US had breached a ceasefire following strikes in southern Iran described by US Central Command as self-defence, while the Islamic Revolutionary Guard Corps threatened retaliation. Talks on ending the conflict and reopening the Strait of Hormuz continued via mediators; the route carries almost 20% of global energy supply.<\/p>\n
Foreign Institutional Investors stayed cautious on Indian equities, selling Rs 2,407.87 crore on Tuesday after buying Rs 821.75 crore on Monday. The dollar traded in a narrow band near 99.00 ahead of April\u2019s US Personal Consumption Expenditure Price Index due on Thursday; core PCE is expected at 3.3% year on year versus 3.2% in March, with a 0.3% monthly rise. In technical trade, USD\/INR held above the 20-day EMA at 95.4387, with RSI near 56; support sits near 95.44, then 95.00, while resistance is seen at 96.37 and around 97.00.<\/p>\n
We are seeing the Indian Rupee strengthen due to falling WTI crude prices, which are now trading near $90 a barrel. This move is being tempered by significant FII outflows, with the NSDL reporting a net outflow of over \u20b920,000 crore for the month of May so far. This creates a tense balance for the USD\/INR pair, currently holding around the 95.70 mark.<\/p>\n
The primary catalyst in the coming weeks is the US-Iran negotiation concerning the Strait of Hormuz. We believe the market is underpricing the binary risk of this event, with implied volatility on one-month USD\/INR options at just 6.5%, below the 8% seen during similar tensions in late 2024. Buying options, such as straddles, could be a prudent strategy to capitalize on a significant price swing regardless of the deal’s outcome.<\/p>\n
Attention must also be paid to the upcoming US Core PCE data, which is the Federal Reserve’s preferred inflation gauge. The market consensus is for a 3.3% year-over-year reading, and a higher-than-expected number would likely reinforce the Fed’s hawkish stance. This would strengthen the US Dollar globally and could push the USD\/INR pair towards the 96.37 resistance level.<\/p>\n
From a technical standpoint, the pair remains above its 20-day EMA, suggesting underlying bullish momentum for the US Dollar. Given the upside potential towards the 97.00 all-time high, we see value in purchasing out-of-the-money call options. For instance, weekly options with a 96.50 strike price offer a low-cost way to position for a potential breakout following the PCE data release or negative news from Iran.<\/p>\n","protected":false},"excerpt":{"rendered":"
Rupee firms on lower oil; FII selling and Iran-Hormuz risks keep USD\/INR volatile ahead of PCE.<\/p>\n","protected":false},"author":87,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[71],"tags":[],"class_list":["post-47573","post","type-post","status-publish","format-standard","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\n\t\n\t\n\t\n\n\t\t