USD/INR drops sharply at market open as RBI steps in to stabilize the Indian Rupee

Indian Rupee Strengthens as RBI Steps In

The Indian Rupee (INR) made notable gains against the US Dollar (USD) at the start of Thursday’s trading session. The USD/INR exchange rate dropped to around 91.80 after the Reserve Bank of India (RBI) intervened in the currency market, aiming to stabilize the Rupee and counteract sharp, one-sided movements, according to Reuters.

Market watchers widely expected the RBI to act, especially after the USD/INR pair reached a record peak of 92.67 on Wednesday. This surge followed significant foreign investment outflows from Indian equities and rising oil prices, both influenced by ongoing conflict in the Middle East.

During the first two trading days of March, Foreign Institutional Investors (FIIs) sold shares worth Rs. 12,048.29 crore—almost twice the amount they withdrew throughout February. Despite improving trade ties between India and the United States, FIIs remain cautious and continue to reduce their exposure to Indian stocks.

Escalating global oil prices, fueled by the conflict involving the US, Israel, and Iran, have put pressure on the currencies of countries that depend heavily on oil imports for their energy requirements.

Middle East Conflict Continues to Impact Markets

The situation in the Middle East shows little sign of resolution. US President Donald Trump has indicated that hostilities may persist for another four to five weeks. Meanwhile, Iran has dismissed reports suggesting it is open to negotiating a ceasefire with the US. An official from Tehran, quoted by Tasnim, stated, “No message has been sent from Iran to the US, nor will any response be given to US messages.” Iran has also warned that the conflict could be prolonged.

On Tuesday, The New York Times reported that Iran’s Ministry of Intelligence had indirectly approached the US Central Intelligence Agency (CIA) to discuss possible terms for ending the conflict. This development triggered a sharp pullback in the US Dollar Index (DXY), which had just reached a three-month high of 99.68.

Since then, the US Dollar Index has rebounded from a low near 98.67 and was trading up 0.25% around 99.00 at the time of reporting.

US Economic Data and Federal Reserve Outlook

In the United States, a stronger labor market and signs of rising factory-level inflation are expected to prompt Federal Reserve officials to maintain current interest rates for an extended period. The ADP Employment Report released Wednesday showed that the US private sector added 63,000 jobs in February, surpassing both the forecast of 50,000 and the previous month’s 11,000.

Earlier this week, the US ISM Manufacturing PMI report revealed that the Prices Paid component—a key inflation indicator—jumped to 70.5 in February, well above both the estimate of 59.5 and January’s reading of 59.0.

Investors are now turning their attention to the upcoming Nonfarm Payrolls (NFP) data for February, set to be released on Friday, for further insight into the US job market.

USD/INR Technical Overview: Pullback from Record Highs

The USD/INR pair saw a sharp decline to approximately 91.82 during Thursday’s Asian session. Despite this correction, the short-term outlook remains positive, as the pair continues to trade above the rising 20-day Exponential Moving Average (EMA), currently near 91.36.

The 14-day Relative Strength Index (RSI) has eased to around 62 after briefly entering overbought territory, suggesting that while upward momentum has moderated, buyers are still likely to step in on dips rather than a full reversal taking place.

• Key support is found at the 20-day EMA near 91.36.
• If this level breaks, further support lies at 91.00, followed by the previous reaction low around 90.60.
• On the upside, resistance is seen at the March 4 high of 92.67.

(This technical analysis was prepared with the assistance of AI tools.)