Indian Rupee fails to extend winning streak as oil prices bounce back
The Indian Rupee (INR) opens marginally lower against the US Dollar (USD) on Wednesday after a three-day winning streak. The USD/INR pair rebounds to near 95.85 as oil prices have rebounded strongly due to revived geopolitical risks.
In the opening trade, the MCX Crude Oil contract expiring on August 19 is up 4.3% at around Rs. 7,930, snapping a three-day losing streak.
A sharp recovery in oil prices bodes poorly for the Indian currency, given that India covers 85% of its energy needs from imports. Higher oil prices increase foreign outflows from reserves.
US-Saudi forces retaliate against Iran
Late Tuesday, the United States (US) Central Command (CENTCOM) and Saudi Arabia, in a joint operation, reported carrying out precision strikes in Iraq targeting Iran-backed groups for planning attacks on US forces and Saudi oil facilities in the Eastern Province and Riyadh regions.
The exchange of attacks in the Middle East has renewed fears of a prolonged closure of the Strait of Hormuz, which is a vital passage for almost 20% of global energy supply.
Meanwhile, the announcement from the Iranian Islamic Revolutionary Guard Corps (IRGC) that three oil tankers were 'struck and stopped' a few hours ago after ignoring warnings in the Hormuz indicates that energy transport from the passage remains shut, a scenario that will keep global oil supply squeezed.
Key event is Fed’s monetary policy decision
The major event of the week will be the Federal Reserve’s (Fed) monetary policy decision, which will be announced at 18:00 GMT. The CME FedWatch tool shows that traders see a 69.5% chance that the Fed will leave interest rates unchanged in the range of 3.50%-3.75%. This will be the fifth straight policy meeting when the Fed will maintain the status quo.
Financial markets should not expect monetary policy guidance from the Fed, as Chairman Kevin Warsh explicitly said in the previous meeting that “so-called forward guidance is not well-suited in the current policy juncture”.
Ahead of the Fed’s policy announcement, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, trades 0.13% lower to near 101.25.
Bloodbath in KOSPI – Boon for Indian markets
Plummeting KOSPI stock markets due to nosediving shares of memory-chip manufacturer giant SK Hynix could turn out to be a boon for Indian equity markets in the near term. The Indian stock market underperformed in the last year as global investors diverted their funds to equity markets in South Korea and Taiwan to play the Artificial Intelligence (AI) and semiconductors theme.
The significant plunge in South Korean markets is expected to force global investors to return to the Indian stock market, a scenario that will boost foreign inflows, and hence strengthen the Indian currency.
Technical Analysis: USD/INR struggles to return above 20-day EMA
USD/INR trades higher at around 95.85 at press time, but is keeping a mild bearish near-term bias as it holds just under the 20-day Exponential Moving Average (EMA) at 95.8921.
The pair has slipped back below this short-term average after recent gains, suggesting rallies are being capped by nearby overhead supply, while the Relative Strength Index (14) near 50 hints at fading momentum rather than a decisive directional push.
On the topside, immediate resistance is aligned with the 20-day EMA around 95.89, and a sustained break above this barrier would be needed to resume the journey toward the all-time high at 97.10. Looking down, Tuesday's low at 95.51 is the key support zone, followed by 95.00.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
You may also like
AUD/JPY Price Forecast: Holds gains above 110.50, but maintains bearish bias below 100-day SMA
Hollywood Plans "Film Production Reshoring"! US Economic "Soft Landing" Welcomes a $249.1 Billion Film Incentive Blueprint
A study shows that federal incentives for film and television production will bring $249.1 billion in revenue to the U.S. economy by 2035 and add 143,500 full-time jobs. The Motion Picture Association has been working with Hollywood unions to launch a campaign for national incentives to better compete with markets such as the United Kingdom and Australia.
Tonight, a "dovish rate hike"?
The Federal Reserve is almost certain to raise interest rates tonight, but the key issue is "what will be said after the hike." Citi characterizes this move as a "fine-tuning" adjustment, suggesting there is no inevitable future rate hike, yet warns that if Chairman Powell does not provide clear forward guidance, it will trigger significant market volatility. Goldman Sachs bluntly stated that there is insufficient economic foundation for this rate hike, with inflation being merely a one-off factor, and expects this to be a "signal-less rate hike."
JPMorgan: "Open source disruption" and "AI safety" are not issues, there is still room for capital expenditure in the next two years, semiconductor equipment will become the "new bottleneck"
JPMorgan believes that open-source models are not a threat, regulatory disruptions are only short-term, and cloud vendors’ leverage remains low—the fundamentals of computing power investment have not changed. It forecasts that the capital expenditure of the seven major tech giants will soar from $443 billion in 2025 to $1.577 trillion in 2027, with semiconductor equipment becoming the core bottleneck of the supply chain and a new round of price increases expected in wafer foundry and advanced packaging.
Crypto prices
More
