The Indian Rupee moved from early losses to gains against the US Dollar on Thursday, with USD/INR near 94.15. This followed renewed selling in oil after reports of progress towards reopening the Strait of Hormuz, which handles almost 20% of global energy supply.
WTI crude fell almost 3% to near $90.00. Al-Hadath said talks between the United States and Iran were continuing, with claims of a possible breakthrough in the coming hours for ships stuck in the Strait.
Oil Decline Supports The Rupee
Currencies in oil-importing economies such as India often strengthen when oil prices fall. The move in INR came alongside lower oil costs.
Foreign Institutional Investors stayed net sellers in India in May, selling on two of the three trading days. Total outflows were Rs. 6,620.86 crore.
The US Dollar also weakened, with the Dollar Index down 0.12% at about 97.90, near Wednesday’s over two-month low of 97.62. Markets are watching Friday’s US Nonfarm Payrolls, expected to show 60K new jobs.
In technical trade, USD/INR slipped towards the 20-day EMA at 94.17. RSI eased to about 52.60, with support in the 93s and resistance at 95.53.
Trading Outlook And Key Risks
Given the potential breakthrough in US-Iran talks, we see oil prices falling, which is good for the rupee. This could push the USD/INR pair below its 20-day average near 94.17, opening a path towards the 93.00 level. Traders might consider short-term bearish positions on the USD/INR, betting on continued optimism and lower energy costs.
This situation feels like a reversal of the trend we saw back in late 2024, when geopolitical tensions caused Brent Crude to spike over $110 a barrel and weakened the rupee significantly. We remember how the Reserve Bank of India had to intervene in the markets back then to support the currency. The current drop in WTI to near $90 a barrel provides significant relief and supports a stronger rupee in the immediate term.
However, we must watch the actions of Foreign Institutional Investors, who have sold over Rs. 6,600 crore of Indian stocks in May. This suggests they are still worried about India’s underlying economy, perhaps recalling the stubborn inflation figures from the last quarter of 2025 which averaged over 5.8%. Their selling could limit how much the rupee strengthens, even if oil prices stay low.
This conflict between positive oil news and negative investment flows creates significant uncertainty, which means volatility could rise. This might be a good time to use options strategies, like a long straddle, to profit from a large price move in either direction without having to guess the exact outcome of the Iran talks. As of May 2026, India VIX, the market’s volatility gauge, has already climbed by 4% this week, showing that uncertainty is growing.
Finally, everyone is waiting for tomorrow’s US Nonfarm Payrolls report. The forecast is for a weak 60,000 jobs, a sharp slowdown from the average of 175,000 jobs per month we saw in 2025. A surprisingly strong number could boost the US dollar and send USD/INR higher, while a number weaker than expected could add to the dollar’s decline and help the rupee.
