The Indian Rupee moved from early losses to gains against the US Dollar on Thursday, with USD/INR sliding to about 94.15. The move followed a fall in oil prices on reports that the Strait of Hormuz could reopen soon, a route linked to almost 20% of global energy supply.
WTI crude was down almost 3% to near $90.00. Al-Hadath reported on X that US–Iran contacts are under way to gradually reopen the strait, and said ships stranded there could be affected within hours.
Rupee Strength Fueled By Oil Relief
Foreign Institutional Investors remained net sellers in India’s stock market in May, selling in two of the first three sessions. Total net sales were Rs. 6,620.86 crore.
The US Dollar Index was 0.12% lower at around 97.90, near its over two-month low of 97.62 set on Wednesday. Markets are watching Friday’s US Nonfarm Payrolls report for April, with expectations of 60K new jobs.
USD/INR was near the 20-day EMA at 94.17, leaving the short-term trend unclear. RSI eased to about 52.60, with support watched in the 93s and resistance at 95.53.
The drop in oil prices towards $90 a barrel, driven by hopes of the Strait of Hormuz reopening, is providing immediate strength to the Rupee. We should consider that lower energy costs directly reduce India’s import bill, a significant positive for the currency. This could push the USD/INR pair lower in the short term.
Key Levels And Near Term Trading Focus
We have seen this dynamic play out before, such as during the oil price spikes of 2022, which put severe pressure on the Rupee. Data from early 2026 shows that India’s manufacturing PMI has remained robust, above 58, indicating strong economic activity that relies on stable energy imports. A sustained drop in crude prices below the recent average of $89 per barrel for the Indian basket would reinforce this positive economic signal.
The USD/INR currency pair is now testing a critical technical level around the 94.17 mark. A decisive break below this support in the coming trading sessions could trigger a further move down towards the 93s. Traders should watch this level closely, as it may signal that the Rupee’s recent weakening trend is pausing.
However, we must weigh this against the persistent selling from Foreign Institutional Investors (FIIs), who have offloaded over Rs. 6,600 crore in shares this month alone. Looking back, we remember the significant FII outflows in 2022, when they sold nearly $30 billion in Indian equities, which consistently weakened the Rupee despite other factors. This underlying lack of foreign confidence suggests that the Rupee’s fundamental position remains weak.
This divergence presents an opportunity, as the current Rupee strength might be short-lived. This dip in the USD/INR rate could be a favourable moment to build long positions through futures or by purchasing call options. The strategy would be to bet that once the initial optimism fades, the pressure from FII outflows will cause the pair to resume its upward trend.
The broader weakness in the US Dollar is also a contributing factor, with the Dollar Index hovering near a two-month low. The upcoming US jobs report is expected to show only 60,000 new jobs, which, if accurate, could further weaken the dollar and provide another temporary boost for the Rupee. This makes Friday’s data a key event to watch before committing to a longer-term view.
