Sharp fall in oil prices lifts Indian Rupee further

• Indian Rupee builds on gains against the US Dollar, supported by a steep fall in oil prices.
• A diplomatic settlement with Iran remains the US preference over renewed military action, Washington indicates.
• US midterm elections move into the spotlight for investors.

The Indian Rupee (INR) strengthens further against the US Dollar (USD) on Monday, building on the previous session’s advance as oil prices correct sharply. At the opening of trade, USD/INR is trading near 94.72, down 0.23%.

A decline of almost 4% takes the MCX Crude Oil contract expiring on 19 November to around Rs. 9,545 as the week begins. This marks a sharp pullback from Friday’s multi-month high of Rs. 9,972.

For economies such as India, where energy requirements are met largely through oil imports, a correction in crude prices supports their currencies.

Why have oil prices corrected so sharply?

Renewed optimism over a diplomatic settlement between the United States (US) and Iran has sent oil prices sharply lower at the open.

Speaking over the weekend, US Secretary of State Marco Rubio said President Donald Trump favours a diplomatic solution and that Washington has not decided to resume strikes on Tehran. Nevertheless, he cautioned that the US still has the capability to fulfil whatever military objective Trump chooses to pursue.

Concerns over prolonged risks to energy supplies have eased following Washington’s indication that it is prepared to seek peace. This contrasts with its earlier stated course of joint military action with Israel after the midterm elections.

Supply concerns have also receded after Iran indicated that it could reopen the Strait of Hormuz, a crucial route for almost 20% of global energy supplies.

According to Al Jazeera, Iran’s Foreign Minister Abbas Araghchi said discussions with Qatari mediators are continuing on a proposal to reopen the Strait of Hormuz within two days, provided the US cooperates.

How could US midterm elections influence the US Dollar?

Tuesday’s US midterm elections are set to be this week’s main catalyst for the US Dollar as well as global markets.

For ING analysts, political uncertainty surrounding the forthcoming US midterm elections has become the Dollar’s principal near-term driver. With positions exposed to changes in the political landscape, they point out that “the main risk for the dollar today is some precautionary unwinding of net-long positions ahead of Tuesday’s US midterm elections,”.

According to ING, “a Democratic sweep is trading around 68% in prediction markets,”. The bank cautions that such a result “could be seen as slightly negative for the US dollar from a few angles, from higher risk of government shutdown and gridlock on debt ceiling negotiations to potential damage to already shaky AI-related sentiment.” In this setting, ING advises against excessive near-term optimism towards the greenback, concluding: “We’d be cautious in chasing the USD upside in the next few days.”

USD/INR Technical Analysis: Can the pair shake off its bearish bias?

A fall towards 94.70 on Monday leaves USD/INR with a bearish near-term outlook. Spot continues to trade beneath the 20-day Exponential Moving Average (EMA), which stands at 95.23.

Immediate selling pressure from this short-term EMA continues to weigh on the pair. Meanwhile, the Relative Strength Index (14), at around 40, points to weak momentum but not extreme oversold conditions, suggesting scope for further declines.

For the bearish bias to ease and a broader recovery to become possible, USD/INR would have to break decisively above its first resistance at the 20-day EMA near 95.23. Below current levels, the September low of 94.28 represents a key demand zone.

(The technical analysis of this story was written with the help of an AI tool. Know more.)