Insights 
VT 
The Indian Rupee advanced to nearly 86.10 against the US Dollar during European trading hours. The USD/INR pair dropped as Oil prices fell due to the announcement of an Israel-Iran ceasefire by US President Donald Trump.
Oil prices on the New York Mercantile Exchange declined over 15% from a high of $76.74. This benefits currencies from countries like India, which rely heavily on Oil imports.
Impact On Inflation And Trade
Lower Oil prices help reduce inflation and the current account deficit in India. The ceasefire announcement has boosted Indian equity markets, with Nifty50 and Sensex30 rising sharply, although both surrendered half their gains by closing.
A sharp sell-off in Indian equities followed Iran’s threat to close the Strait of Hormuz. Foreign Institutional Investors purchased Rs. 5,591.77 worth of Indian equities on Monday.
The table shows currency percentage changes, with the Rupee strongest against the Canadian Dollar. The USD/INR pair’s decline is driven by a weaker US Dollar amid a shift in the Federal Reserve’s monetary policy stance.
Fed officials have expressed concern over the labour market, suggesting a potential interest rate cut. The Fed’s Michelle Bowman and Christopher Waller favour cutting rates to address employment risks.
Technical Analysis And Market Sentiment
The USD/INR pair touched the 20-day Exponential Moving Average around 86.10, with the Relative Strength Index showing a bearish reversal. Important support and resistance levels are at 85.70 and 86.93, respectively.
The US PCE Price Index, a key inflation measure, will be released on June 27, 2025, with a consensus of 2.6%, up from the previous 2.5%. This data, used by the Fed, can influence US Dollar strength and monetary policy direction.
With the Indian rupee gaining strongly, particularly pushing towards the 86.10 mark during the European session, it becomes evident that supportive macroeconomic conditions are forming. This rise came in tandem with a broader retreat in the US dollar, most notably as crude oil prices slipped—a result triggered by recent geopolitical developments, especially following a ceasefire announcement between Israel and Iran as conveyed by Trump.
From our perspective, this alignment proves highly favourable for India. Brent and NYMEX oil benchmarks have both tumbled over 15% since touching recent highs, easing one of the largest external financial pressures India typically contends with. For an economy that spends heavily on oil imports, this eases pricing on both consumer and wholesale levels, which in turn relieves the central bank’s inflation burden. Cheaper energy naturally reduces the trade gap and supports the rupee’s relative standing.
Equity markets responded quickly to this dual impact of falling oil and geopolitical calm. Both major indices—Nifty50 and Sensex30—spiked in early trade, though gains were only partially retained by the close. This retreat followed heightened tensions triggered by a warning from Iran about the Strait of Hormuz. What’s worth emphasising here is the consistent interest from foreign funds. According to recent data, foreign institutional flows remained net buyers, to the tune of nearly Rs. 5,600 crore. That level of inflow, on such a volatile day, conveys underlying confidence.
Technical readings support the rupee’s current momentum. Not only has the USD/INR pair dipped toward its 20-day EMA at 86.10, but the Relative Strength Index also reflects weakening bullish pressure on the dollar. Attention should pivot to the next potential support point at 85.70—if the rupee continues to gain—and resistance near 86.93, which may invite selling pressure or at least a temporary consolidation.
Looking stateside, there’s been an unmistakable shift in sentiment at the Federal Reserve. Policymakers like Bowman and Waller, who have until recently leaned on caution, now appear more open to lowering rates. Their reasoning hinges almost entirely on concerns surrounding employment figures, which are beginning to show softness. This softening favours a weaker dollar, cementing the case for rupee strength.
The forthcoming US PCE Price Index, set for release on June 27, will carry weight. The consensus stands at 2.6%, a modest increase from 2.5% prior. Though this isn’t alarming in itself, any upward deviation might momentarily bolster the dollar, depending on how it’s interpreted vis-à-vis monetary policy expectations. That said, with inflation relatively contained and employment softening, the macro narrative continues to support tapering interest rates rather than raising them.
It’s a detailed picture, but one with fairly clear contours—scenarios that contain embedded opportunities.
