• The Indian Rupee slides to lifetime lows against the US Dollar at 93.00 ahead of the Fed’s monetary policy.
• Investors expect the Fed to maintain the status quo amid higher oil prices.
• Consistent foreign outflows and higher oil prices are expected to keep the Indian Rupee on the back foot.

The Indian Rupee (INR) posts a fresh all-time low against the US Dollar (USD) at 93.00 during India's afternoon trading hours on Wednesday. The USD/INR pair strengthens as the Indian Rupee continues to underperform, partly due to higher oil prices and the consistent foreign outflows from the Indian equity market.

Indian Rupee remains under pressure due to multiple headwinds

Currencies from nations like India, which are heavily dependent on oil imports to meet their energy needs, face higher outflows in high oil price conditions.

Oil prices have surged significantly in the past few weeks in the wake of the war in the Middle East, which involves the United States (US), Israel, and Iran, leading to the closure of the Strait of Hormuz, a passage to one-fifth of the global oil.

Although Iran has allowed Indian-flagged tankers to ship oil and Liquefied Petroleum Gas (LPG) through the Strait of Hormuz, this has eased concerns about India's domestic energy supply, but higher oil prices could widen India's fiscal deficit.

So far in March, Foreign Institutional Investors (FIIs) have remained net sellers on all trading days and have offloaded their stake worth Rs. 70,989.96 crore, according to NSE data. There has been a significant outflow of foreign funds from the Indian stock market in March as higher oil prices have forced market experts to trim their earnings projections for the fourth quarter of FY 2025-26.

Investors await cues regarding Fed's monetary policy outlook

The US Dollar trades broadly stable ahead of the Federal Reserve’s (Fed) monetary policy announcement at 23:30 IST (18:00 GMT).

During the press time, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, trades flat around 99.50 after a steep correction in the last two trading days.

The Fed is anticipated to leave interest rates unchanged in the range of 3.50%-3.75%, according to the CME FedWatch tool. This would be the second straight meeting in which the Fed holds interest rates steady. Speculation that the Fed will hold interest rates steady in the near term has intensified due to de-anchored inflation expectations across the world amid surging oil prices.

As the Fed will likely maintain the status quo, investors will pay more attention to the Fed’s dot plot, a tool that shows where officials see interest rates heading in the near-to-longer term, and to Chairman Jerome Powell's comments in his press conference regarding the monetary policy outlook.

The CME FedWatch tool also shows that traders are confident the Fed will keep interest rates at their current levels till the July policy meeting. For the September meeting, traders see an almost 53% chance of an interest rate cut.

Technical Analysis: USD/INR sees more upside as 20-day EMA keeps rising

USD/INR jumps to a fresh all-time high at 93.00 as of writing. The near-term bias is bullish as price holds above the rising 20-day Exponential Moving Average (EMA), which has trailed the advance from the mid-90.50s and continues to provide dynamic support. The sequence of higher closes remains intact despite a brief pause, while the 14-day Relative Strength Index (RSI) in the 60.00-80.00 zone signals strong upside momentum.

Initial support emerges at the 20-day EMA around 92.15, followed by a deeper cushion at 91.70 that aligns with the prior breakout area. A daily close below the latter would weaken the bullish structure and expose 91.30 next. On the upside, the breakout of the previous all-time highs at 93.00 has opened the path towards the 93.50 region.

(The technical analysis of this story was written with the help of an AI tool.)

(This story was corrected at 09:50 GMT to say in the first bullet point that the Indian Rupee slides to lifetime lows, not highs)