The Indian rupee (INR) continued to underperform against the US dollar (USD) on Wednesday, trading near fresh all-time lows. USD/INR maintains gains near 97.00 as elevated crude oil prices driven by fears of an extended closure of the Strait of Hormuz remain a major drag on the Indian rupee.

At press time, the price of WTI crude oil is slightly lower, around $102.50, but has increased by more than 50% since the beginning of the war in the Middle East.

Currencies from economies such as India that rely heavily on oil imports to meet their energy needs tend to underperform in a high oil price environment.

Trump threatens military action if Iran does not agree to the deal

Oil prices remain elevated as negotiations between the United States (US) and Iran on a number of issues, such as Tehran’s nuclear ambitions, war damage compensation and the US blockade of Iranian seaports, remain unresolved.

Iranian Deputy Foreign Minister Kazem Gharibabadi said on Tuesday that the lifting of sanctions, the release of frozen funds and an end to the US blockade are the main demands contained in Iran’s recent proposal to the US, according to IRNA.

Meanwhile, US President Donald Trump has threatened to resume military attacks on Iran if Iran does not agree to a deal soon. Trump said on Tuesday that he was not in favor of war, but that Washington could strike Iran again in the next few days.

“I hope we don’t have to go to war, but we may have to deal them another big blow,” Trump told reporters on Tuesday. Asked how long he would wait, Trump replied: “Well, I say two or three days, maybe Friday, Saturday, Sunday. Something maybe early next week – for a limited period.”

In response, Iran said it was prepared for any military aggression. On Tuesday, an Iranian military spokesman also said the Iranian army would “open new fronts” against the US if it resumes attacks on the country.

FII selling pressure will resume on Tuesday

After net buyers remained on the Indian stock market for three days in a row, selling pressure from foreign institutional investors (FIIs) has returned amid growing concerns over India’s economic prospects due to higher energy prices. On Tuesday, FIIs emerged as net sellers by dividing their stake worth Rs. 2,457.49 crores. In the last three trading days, FIIs have purchased a total of shares worth Rs. 4,330.32 crores.

Higher yields on US treasury bonds encourage people to give up risk

Rising US Treasury yields on sturdy expectations that the Federal Reserve (Fed) will not cut interest rates this year are also hurting risk-sensitive currencies such as the Indian rupee. The US 10-year bond yield hit a fresh yearly high of 4.69% during the day.

According to CME’s FedWatch tool, the odds of the Fed making at least one rate hike this year are 56.3%, with the rest almost favoring “maintain.”

Technical analysis: USD/INR sets fresh all-time high near 97.00

At the time of writing, the USD/INR rate is higher at around 96.85. The pair remains well above the 20-day exponential moving average (EMA) at 95.29, maintaining a highly supported short-term structure.

The 14-day Relative Strength Index (RSI) at 72.96 is in overbought territory, suggesting that momentum remains sturdy but is beginning to stretch, which could encourage miniature corrective pauses rather than pure continuation of gains.

On the other hand, immediate support is seen at the 20-day EMA near 95.29, where a pullback can be expected to attract buying interest on the dip while the broader uptrend remains unchanged. A daily close below this moving average would indicate a deeper correction towards lower levels, but as long as the price remains above this moving average, the path of least resistance remains up despite overbought conditions. Looking up, the pair could look to extend the rally towards 98.00 if it settles above 97.00.

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