The Indian Rupee traded higher against the US Dollar on Friday afternoon in India, pushing USD/INR down to near 92.00. The move followed Reserve Bank of India action in the foreign exchange market on Thursday after USD/INR hit a record 92.67 on Wednesday. Oil prices remained elevated amid the Middle East war involving the US, Israel, and Iran. WTI traded near a fresh 18-month high above $80.00 after rising on supply concerns linked to military activity near the Strait of Hormuz. India’s currency remains sensitive to oil because the country relies heavily on imports for energy. The US has allowed India to buy crude oil from Russia for one month during the Iran conflict. Foreign Institutional Investors were net sellers in all three March trading days, selling Rs. 15,800.81 crore, based on NSE data. The US Dollar traded cautiously before the US Nonfarm Payrolls release at 13:30 GMT. February payrolls were expected at 59K versus 130K in January, with unemployment seen at 4.3%. CME FedWatch showed July hold odds at 47.4%, up from 33.4% a week earlier. USD/INR stayed above its 20-day EMA near 91.43, while the 14-day RSI held above 60.00. Support levels were 91.40–91.45, then 91.00 and 90.60, with resistance at 92.67 and a possible move towards 93.00. The Indian Rupee is finding temporary relief near the 92.00 level against the US Dollar, largely because the Reserve Bank of India is selling dollars to prevent a sharper fall. However, the fundamental pressures from high oil prices and foreign investors selling Indian stocks remain intense. This tug-of-war between central bank action and market forces creates a volatile trading environment. With WTI crude oil holding firm above $80 per barrel, a level we haven’t consistently seen since late 2024, India’s import bill is rising sharply. This is spooking foreign investors, who have sold nearly Rs. 16,000 crore of Indian equities in the first three days of March alone, a stark reversal from the net buying we saw late last year. These outflows put direct downward pressure on the Rupee. Today’s US Nonfarm Payrolls report is the immediate focus, as it will heavily influence the Federal Reserve’s interest rate path. Expectations are low at 59K new jobs, so any figure significantly above that could strengthen the US Dollar and push the USD/INR pair higher. The market is already pricing in a lower chance of a Fed rate cut in July, a sentiment that strong data would solidify. Given the strong underlying upward trend for USD/INR but the risk of sudden RBI-driven pullbacks, buying call options is a sensible strategy. This approach allows us to capitalize on a potential break above the all-time high of 92.67, while our downside is limited to the premium paid if the Rupee strengthens unexpectedly. The defined risk is especially valuable ahead of a major data release. The current situation, with fundamentals pointing to Rupee weakness but the RBI actively intervening, is keeping implied volatility elevated. We saw similar conditions back in 2022 when the Rupee was under pressure, reminding us that sharp moves can happen in either direction. Traders who anticipate a big move but are unsure of the direction could consider using straddles to profit from this heightened volatility. For those already holding long USD/INR positions, it is crucial to protect profits from any sharp, RBI-induced reversals. Using the 20-day moving average near 91.43 as a key level for stop-loss orders is a practical way to manage this risk. Hedging with out-of-the-money put options can also be an effective way to stay in the trade while insuring against a sudden downturn.

Start trading now – Click here to create your real VT Markets account