Indian Rupee ticks up against US Dollar on RBI’s likely intervention

The Indian Rupee saw a slight increase against the US Dollar at the start of Tuesday's trading session. The USD/INR pair fell to approximately 95.70, as the Rupee edged up in anticipation of possible intervention from the Reserve Bank of India (RBI) to curb excessive movements against the domestic currency. Analysts expect RBI's support to be temporary, given the impact of global energy prices, particularly the prolonged closure of the Strait of Hormuz, which accounts for nearly 20% of global energy supply.

The MCX Crude Oil contract, expiring on September 21, rose 0.25% to near Rs. 8,160, near its four-week high of Rs. 8,404. US Treasury Secretary Scott Bessent warned of increasing economic pressure on Iran, threatening sanctions on Iranian financial connections worldwide. Iran pledged to counter US economic sanctions, while remaining confident that "neither China nor Russia had accepted the US measures."

Financial markets fear that US economic sanctions could lead to higher oil prices, strengthening the US Dollar and US Treasury Yields, which could pose fiscal concerns for the US. Analysts at MUFG note that Iran has warned not a single drop of oil will pass through the Strait of Hormuz if the US implements its "Economic D-Day" plan, yet the oil markets do not seem convinced.

MUFG warns of potential escalation, suggesting that if China is hit hard, it could signal a response from China, potentially bouncing back crude oil prices and strengthening the US Dollar. The technical analysis of USD/INR shows a mild bullish bias, with the pair trading above the 20-day Exponential Moving Average (EMA) at 95.61, suggesting support at the 20-day EMA near 95.62 and resistance at the August 24 high at 95.98.