Indian Rupee opens lower as Trump demands war compensation

The Indian Rupee (INR) began the trading day on Tuesday with a cautious stance against the US Dollar (USD). The USD/INR pair pushed higher, nearing 95.40, driven by surging oil prices resulting from growing concerns over a prolonged global supply disruption. The MCX Crude Oil contract, expiring on August 19, showed a 0.45% increase, reaching near Rs.

7,835, close to its weekly peak. On Monday, US President Donald Trump had demanded compensation for war casualties in the Middle East from Iran, as a key condition for reopening the Strait of Hormuz, a vital route to nearly one-fifth of global energy supply. Trump also stated that Iran should be held responsible for damages and deaths caused to the people of Lebanon, Syria, Yemen, and Gaza.

Over the weekend, Iran's Mohammad Bagher Zolghadr, secretary of the council, outlined six conditions for reopening the Hormuz Strait. Both sides' demand for compensation for war damages has increased uncertainty about a near-term truce, further boosting oil prices. Currencies of economies like India, which heavily rely on oil imports, usually perform poorly in high-oil-price environments.

This week, the main factors influencing the Indian Rupee and the US Dollar will be the respective Consumer Price Index (CPI) data for July, released on Wednesday. Economists from DBS Group Research predict that key inflation and trade numbers will be released in the second week of August, with July's headline inflation expected to remain steady at 4.4% YoY compared to June.

High-frequency data indicates a rise in food staples such as pulses, sugar, milk, and edible oils, while vegetable prices have stabilized. A recent rainfall increase in July has also boosted sowing activity. In terms of prices, DBS expects adjustments in domestic retail fuel products (non-subsidized LPG rose by 10% YoY in July) to reflect in the utilities and fuel segments.

Despite this, they anticipate underlying pressures to remain contained, with core readings remaining benign at sub-4% in July, aided by a moderation in precious metals. In the US, both headline and core CPI are anticipated to have decreased, with figures anticipated to be lower at 3.4% and 2.5% YoY, respectively. If inflationary pressures in the US ease, it could alleviate concerns about Federal Reserve (Fed) interest rate hikes.

Traders are closely watching the daily chart of USD/INR at 95.40, which remains above the 60-day exponential moving average (EMA) at 95.26, suggesting a modest bullish near-term bias. Momentum, though less conclusive, is currently at 47 in the 14-day Relative Strength Index (RSI), indicating a consolidative tone rather than strong directional conviction.

However, the preservation of levels above the EMA favor a mild upside while this floor remains intact. Should price sustain above the recent close, it would likely be driven by shifts in momentum, while a daily close below 95.2616 would weaken the bullish bias and expose a broader corrective phase.