The Indian Rupee rose against the US Dollar on Thursday after almost two weeks of weakness. USD/INR fell to about 96.30 from just above 97.00, supported by lower oil prices and Reserve Bank of India action.
Reuters cited traders who pointed to central bank operations aimed at supporting the Rupee after repeated record lows. RBI activity has also been reported in offshore and Non-Deliverable Forwards since the Middle East war began.
Oil Prices And Central Bank Support
WTI oil traded near $96.30, close to Wednesday’s low, after heavy selling. The move followed comments from US President Donald Trump that talks with Iran were in the “final stages”.
Foreign Institutional Investors were net sellers again on Wednesday, selling Rs. 1,597.35 crore of Indian equities. They also sold Rs. 2,457.49 crore on Tuesday.
US 10-year Treasury yields eased to about 4.59% from 4.69%, a level last seen around the subprime crisis. US headline inflation was 3.8% year-on-year in April, and CME FedWatch puts the chance of at least one rate rise this year at 51%, with the rest expecting rates to stay at 3.50%–3.75%.
India’s HSBC Composite PMI was 58.1 in May versus 58.2 in April. Manufacturing PMI slipped to 54.3 from 54.7, while Services PMI edged up to 58.9 from 58.8.
Technical Levels And Market Signals
USD/INR stayed above the 20-day EMA at 95.36, while RSI eased to about 66. Support sits near 95.37, with 95.00 below, and 98.00 is a possible upside level if 97.00 is regained.
We remember this time last year when the rupee found some relief, pulling back from its highs near 97 against the dollar. This was largely driven by hopes of a deal with Iran cooling oil prices and aggressive intervention from the Reserve Bank of India. That brief correction, however, proved to be a temporary pause in the larger trend.
Today, on May 21, 2026, the situation has evolved with USD/INR trading near 98.50. Oil prices have remained a persistent headwind, with Brent crude recently trading above $105 per barrel, keeping pressure on the currency of a major importer like India. The RBI continues its strategy of intervening to curb volatility, with foreign exchange reserves holding strong above $650 billion, but this only seems to be slowing the depreciation rather than reversing it.
We note that while last year’s manufacturing PMI showed a slight slowdown to 54.3, India’s economic fundamentals have remained robust with the latest PMI figures for this year holding strong at 57.5. However, the sentiment from Foreign Institutional Investors remains a weak point, as we’ve seen net outflows of over $2 billion in the last month. This shows that global risk sentiment is overriding domestic strength for now.
The dollar’s strength is also supported by a different interest rate picture than what we saw in 2025. Back then, 10-year US Treasury yields had corrected to 4.59%; today they are hovering around 4.80% as US inflation remains sticky at 3.5%. This has pushed any expectation of Federal Reserve rate cuts further into the future, keeping the dollar attractive.
For derivative traders, this suggests that any dips in the USD/INR should be viewed as opportunities to enter long positions. Buying call options on USD/INR with strikes around 99.00 or 99.50 could be a viable strategy to profit from the expected continued, albeit gradual, depreciation of the rupee. This approach limits downside risk while offering exposure to potential upward moves toward the 100.00 psychological level in the coming weeks.
