Indian Rupee draws support from consistent RBI intervention, lower oil prices

On Wednesday, the Indian Rupee (INR) opened at a flat rate against the US Dollar (USD), with the USD/INR pair hovering near 96.00. The Indian currency benefited from consistent support provided by the Reserve Bank of India (RBI) through interventions in the spot and Non-Deliverable Forward (NDF) markets. Additionally, a decline in oil prices added to the currency's stability.

MCX Crude Oil futures, set to expire on October 19, experienced a 0.45% decrease, settling near Rs. 8,635. Oil-importing economies, such as India, gain some relief when oil prices stabilize. Deutsche Bank analysts pointed out that the initial surge in Brent oil prices was tempered after Saudi Arabia restored a significant portion of its oil flows through the East-West pipeline.

Goldman Sachs estimated that Persian Gulf oil exports, including "dark exports," would recover to their 2025 average after doubling in September. However, concerns remain about the sustainability of this correction, particularly in light of doubts surrounding the prospects of resuming US-Iran diplomacy. Meanwhile, Qatar's mediation efforts to facilitate a diplomatic breakthrough between the US and Iran have thus far been unsuccessful, which may facilitate further upward price movement.

The focus of traders in the coming session will be on the US Personal Consumption Expenditures (PCE) Price Index for August, scheduled for release at 12:30 GMT. The core PCE inflation rate is anticipated to remain stable at 3.3% year-over-year, with a monthly increase of 0.3% compared to the previous month's 0.2%. This data will significantly impact the Federal Reserve's (Fed) interest rate expectations.

Market sentiment currently favors the Fed continuing its monetary tightening cycle to curb high inflation risks stemming from energy supply constraints and robust AI-driven demand. The Fed initiated its rate hike cycle in September, increasing key rates by 25 basis points to the 3.75%-4.00% range. Analysts at MUFG/BTMU project that the US rate market now expects an additional 100 basis points of rate hikes throughout the year.

The upcoming Nonfarm Payrolls (NFP) data for September, released on Friday, will be a key catalyst for Fed's interest rate projections. Currently, USD/INR is trading at 95.9755, staying above the 20-period exponential moving average (EMA) at 95.6996, which supports a mildly bullish near-term outlook. The pair has shown gradual gains over recent sessions, and the Relative Strength Index (RSI) at 59.8 indicates positive momentum without signaling overbought conditions.

A daily close below the 20-period EMA could suggest weakening bullish momentum and a potential shift towards a corrective phase.