The Indian rupee extended its fall against the US dollar, with USD/INR reaching a new record high of 96.33. WTI oil rose about 1.66% to near $102.60, which can pressure currencies in oil-importing economies.
Tensions around US-Iran talks added to oil price gains. Donald Trump warned Iran via Truth Social, while negotiations were reported as stalled, and the New York Times said the US and Israel may prepare coordinated attacks as soon as next week.
Flows Policy And Global Risks
Foreign Institutional Investors were net buyers in Indian equities for a second straight day on Friday. FIIs bought Rs. 1,329.17 crore on Friday after Rs. 187.46 crore on Thursday, following seven sessions of net selling with an average of Rs. 4,144.01 crore.
Markets are watching the Federal Open Market Committee minutes due on Wednesday. CME FedWatch puts the chance of at least one US rate hike this year at 53.7%, after earlier expectations of two cuts.
US CPI headline inflation rose to 3.8% year-on-year in April from 3.3% in March. USD/INR is above the 20-day EMA at 94.93, with RSI near 69; support sits at 96.00 and 94.93, with 97.00 as an upside level.
Looking back at the events of 2025, we saw the rupee hit an all-time low of 96.33 against the dollar. As of today, May 18, 2026, the USD/INR pair is trading around 95.80, showing that the pressure has eased but not disappeared. The memory of that high is keeping traders on edge, creating significant resistance at that level.
Oil And Macro Backdrop
The significant drop in oil prices has provided some relief compared to last year’s crisis when WTI crude was trading above $102 per barrel. Currently, WTI is hovering around a more manageable $79 per barrel, which reduces the import bill and eases pressure on the rupee. However, any new geopolitical flare-ups, similar to the US-Iran tensions we witnessed in 2025, could quickly send oil prices higher again.
A major shift has occurred in US monetary policy expectations since last year when we were bracing for Federal Reserve rate hikes. US inflation has since cooled from the 3.8% seen in April 2025 to a more recent reading of 3.4%, shifting the market’s focus towards potential rate cuts later this year. This changing outlook could limit further broad-based dollar strength in the medium term.
Despite these positive factors, Foreign Institutional Investors (FIIs) have remained net sellers this month, pulling over Rs. 23,000 crore from Indian equities so far in May 2026. This echoes the cautious sentiment from last year and continues to weigh on the rupee. Countering this, the RBI’s foreign exchange reserves stand at a robust $641 billion, giving it substantial power to intervene and prevent another disorderly run towards the old highs.
Given these conflicting signals, traders should consider strategies that benefit from range-bound price action in the coming weeks. With the RBI likely to defend the 96.33 high and persistent importer demand providing a floor, the USD/INR pair may consolidate. Selling option strangles or setting up iron condors with a defined range, perhaps between 94.50 and 96.50, could be a prudent approach to capitalize on this expected stability.
