The Indian Rupee rose against the US Dollar on Friday after the Reserve Bank of India opened special credit lines for state-run oil buyers to meet foreign exchange needs. USD/INR fell to about 92.70 after two days of sideways trading.
Reuters reported that on Thursday the RBI asked state-run refiners to reduce spot US Dollar buying and use the credit line, which was also used when the Russia-Ukraine war began. In late March, the RBI told banks to cap net open rupee positions at $100 million at the end of each business day.
Rupee Gains On Rbi Credit Lines
Oil prices stayed capped as markets took a risk-on tone after US President Donald Trump said a deal with Iran was very likely. He said the US was “very close to a deal with Iran” and warned military action would resume if no deal is reached.
The US Dollar Index was near 98.25 and was set for another weekly fall. WTI traded around $90 in recent days after rising above $100, which reduced pressure on oil-importing currencies.
Following a two-week US-Iran ceasefire announced on 8 April, foreign institutional investors were net buyers for two sessions, adding Rs. 1,048.51 crore. In technical trade, USD/INR stayed below the 20-period EMA at 93.06, with RSI at 48.6 and support near 92.46.
Based on the current environment, we see the Indian Rupee strengthening against the US Dollar in the coming weeks. The Reserve Bank of India’s direct intervention to provide a credit line for oil refiners is a significant move that will reduce spot demand for dollars. This measure is likely to put continued downward pressure on the USD/INR pair.
Outlook And Key Risks Ahead
The RBI’s actions are not happening in a vacuum; India’s oil import bill exceeded $160 billion last year, making these importers the single largest source of dollar demand. By rerouting this demand away from the open market, the central bank is effectively capping any potential upside for the pair. We saw a similar, successful intervention back in 2022 when oil prices first spiked, which lends credibility to this strategy.
Lower oil prices, currently holding below $90 a barrel due to optimism over a US-Iran deal, provide another tailwind for the Rupee. Historically, periods of easing geopolitical tension in the Middle East have corresponded with lower energy costs and a stronger Rupee, as we observed in the mid-2010s. This environment makes selling USD/INR call options with strikes above 94.00 an attractive strategy for collecting premium, as a sharp upward move seems unlikely.
The return of Foreign Institutional Investors, who are now net buyers in the Indian stock market, further supports a stronger Rupee. After net outflows of nearly $2 billion in the first quarter of 2026, this shift in sentiment brings more foreign currency into the country. If this trend continues, it will add to the downward pressure on USD/INR.
From a technical standpoint, with the pair trading below its 20-day moving average of 93.07, the path of least resistance is lower. We should consider buying put options with a strike price near 92.50, targeting the support level mentioned around 92.45. This strategy offers a defined-risk way to profit from the expected decline towards that March high.
However, we must remain aware of the risks tied to the US-Iran negotiations. A sudden collapse of the talks could cause oil prices to spike and reverse the positive sentiment, sending USD/INR higher. Therefore, maintaining a small, long position in out-of-the-money call options could serve as a cheap hedge against such an unexpected outcome.
