The Indian rupee traded slightly weaker against the US dollar late on Monday, with USD/INR near 96.46 as persistent foreign fund outflows weighed on the currency. The pair struggled to recover even as domestic oil prices eased from an early spike: the MCX crude contract expiring 20 July was flat around Rs 7,950 after opening 2.6% higher near Rs 8,150, the strongest level in over a month. Market attention stayed on the Strait of Hormuz, which handles almost one-fifth of global energy supply, after reports of attacks on two tankers and continued concerns over shipping risk.
Foreign Institutional Investors extended their selling streak for a fifth straight session, having offloaded Rs 9,119.76 crore across all trading days last week. In the US, the dollar index dipped to about 100.70 as rate expectations firmed, with CME FedWatch putting the probability of the Federal Reserve holding rates in July at 85.6%, up from 65.8% last week after softer June CPI. Technically, USD/INR hovered around 96.44, above the 20-day EMA of 95.66, while RSI stood at 64.31 and the next upside reference was the 97.10 record high.
Currency, Equities and Options Positioning
We recommend that derivative traders position for continued strength in the USD/INR pair by buying call options or executing bull call spreads. The exchange rate is holding firmly above its 20-day exponential moving average of 95.66 and looks poised to test the 97.10 level in the coming weeks. This upward momentum is technically supported by the daily RSI of 64.31, which suggests there is still room for the dollar to rise before becoming overbought.
Because foreign institutional investors offloaded Rs 9,119.76 crore last week, we advise hedging equity portfolios with Nifty put options. Historically, massive capital flights—like the record Rs 94,000 crore pulled out of Indian equities in October 2024—strongly correlate with domestic market downturns and rupee depreciation. Buying protective puts now will guard against further downside as global funds continue to exit emerging markets.
Energy Market Strategies and Federal Reserve Outlook
In the energy markets, we suggest trading MCX crude oil contracts with range-bound options strategies like iron condors. Although geopolitical friction in the Middle East briefly pushed oil prices up by 2.6% to Rs 8,150, diplomatic ceasefire efforts quickly dragged prices back to Rs 7,950. Using neutral options strategies will help us profit from high implied volatility without taking unnecessary directional risks.
Lastly, we should prepare for next week’s Federal Reserve meeting by reducing exposure to volatile currency pairs. While there is an 85.6% chance that the Fed will keep interest rates steady, any surprise in their forward guidance could heavily impact the US Dollar Index, which currently sits at 100.70. Setting tight stop-losses on outstanding USD/INR long positions will protect our gains ahead of the announcement.
