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- Indian Rupee surges 0.75% to near 86.10 against the US Dollar as Oil price dives following Israel-Iran truce.
- A significant improvement in investors’ risk appetite has battered the US Dollar badly.
- Fed’s Bowman argued in favor of reducing interest rates in the July policy meeting.
The Indian Rupee (INR) surges to near 86.10 against the US Dollar (USD) during European trading hours on Tuesday. The USD/INR pair slumps as the bleeding Oil price follows the announcement of the Israel-Iran ceasefire by United States (US) President Donald Trump through a post on Truth.Social has strengthened the Indian currency.
The Oil price on the New York Mercantile Exchange (NYMEX) has dived over 15% from its high of $76.74. This scenario is favorable for currencies of nations that have lower Oil reserves and depend significantly on imports to address their needs, such as the Indian Rupee.
Inflation in the Indian economy cools down, and the current account deficit diminishes if Oil prices remain lower.
It has been fully agreed by and between Israel and Iran that there will be a Complete and Total CEASEFIRE (in approximately 6 hours from now, when Israel and Iran have wound down and completed their in-progress, final missions!), for 12 hours, at which point the War will be considered, ENDED,” Trump wrote.
Following the announcement of Israel-Iran ceasefire by US President Trump, a senior Iranian official has also confirmed that Tehran agreed to Qatar mediated, US-proposed ceasefire with Israel, Reuters reported.
Lower Oil prices and a sharp increase in the risk appetite of investors, following the Iran-Israel ceasefire announcement, have fuelled a strong recovery in the Indian equity market, sending Nifty50 208 points higher at open to near 25,180. Meanwhile, Sensex30 has rallied 0.85% to near 82,600. Both indices saw a sharp sell-off in the opening session on Monday after Iran threatened to close the Strait of Hormuz through which almost a quarter of the global Oil is supplied. However, they recovered sharply due to the strength in the domestic economy. On Monday, Foreign Institutional Investors (FIIs) bought Rs. 5,591.77 worth of Indian equities.
Indian Rupee gains while US Dollar’s as safe-haven demand diminishes
- The sharp downside move in the USD/INR pair is also driven by weakness in the US Dollar due to multiple headwinds: improving risk profile and a shift in Federal Reserve (Fed) officials’ stance on the monetary policy outlook.
- A sharp increase in the risk appetite of investors, following the Israel-Iran truce, has diminished the appeal of the US Dollar, which gained sharply on Monday. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, tumbles to near 98.10 during Asian trading hours on Tuesday from a fresh two-week high around 99.40 posted the previous day.
- On the domestic front, recent commentaries from a few Fed officials have signaled growing concerns over the labor market and increasing confidence that the impact of tariffs imposed by President Donald Trump on inflation will be limited. A scenario that bolsters hopes for an interest rate cut in the near term.
- On Monday, Fed Governor Michelle Bowman showed openness to reducing interest rates in the July meeting, citing downside risks to employment and confidence that the trade policy is only likely to have ‘minimal impacts’ on inflation. “It is time to consider adjusting the policy rate,” Bowman said and added, “We should put more weight on downside risks to the job market going forward.”
- Last week, Fed Governor Christopher Waller also argued in favor of cutting interest rates in July, citing concerns over the labor market. “The Fed should not wait for the job market to crash in order to cut rates,” Waller said.
US Dollar PRICE Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the weakest against the New Zealand Dollar.
| USD | EUR | INR | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.23% | -0.20% | -0.71% | -0.14% | -0.78% | -0.86% | 0.03% | |
| EUR | 0.23% | -0.27% | -0.47% | 0.09% | -0.54% | -1.07% | 0.27% | |
| INR | 0.20% | 0.27% | -0.05% | 0.39% | -0.25% | -0.37% | 0.47% | |
| JPY | 0.71% | 0.47% | 0.05% | 0.59% | -0.09% | -0.17% | 0.63% | |
| CAD | 0.14% | -0.09% | -0.39% | -0.59% | -0.64% | -1.16% | 0.03% | |
| AUD | 0.78% | 0.54% | 0.25% | 0.09% | 0.64% | -0.52% | 0.67% | |
| NZD | 0.86% | 1.07% | 0.37% | 0.17% | 1.16% | 0.52% | 1.20% | |
| CHF | -0.03% | -0.27% | -0.47% | -0.63% | -0.03% | -0.67% | -1.20% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
Technical Analysis: USD/INR slides to near 86.00
The USD/INR pair tumbled at open to near the 20-day Exponential Moving Average (EMA) around 86.10, suggesting that the near-term trend has become uncertain.
The 14-day Relative Strength Index (RSI) slides vertically to near 50.00 after remaining above 60.00 in the past few trading days, indicating a strong bearish reversal.
Looking down, the June 12 high at 85.70 will act as key support for the major. On the upside, the June 19 high of 86.93 will be a critical hurdle for the pair.
Risk sentiment FAQs
In the world of financial jargon the two widely used terms “risk-on” and “risk off” refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.
