Indian Rupee trades with caution ahead of Trump-Xi meeting outcome

The Indian Rupee (INR) holds onto almost week-long losses against the US Dollar (USD) in the opening session on Thursday. The USD/INR pair appears firm near 95.80, close to its all-time high of 95.88 posted on Wednesday, with oil prices remaining broadly elevated ahead of the outcome of the ongoing meeting between United States (US) President Donald Trump and Chinese leader Xi Jinping. In the Asian trade, the WTI Oil price trades calmly at around $97.15.

Investors await Trump-Xi meeting outcome

The oil prices appear calm amid expectations that US President Trump and Chinese leader Xi are expected to discuss mainly regarding the Iran war, along with other issues such as Taiwan, Artificial Intelligence (AI), sophisticated chips, tariffs, and rare earths.

On Tuesday, US President Trump stated that Washington doesn’t need anyone’s help in resolving conflicts with Iran, when asked if he would discuss the Iran war with Chinese leader Xi Jinping during the May 13-15 visit to Beijing. “I don’t think we need any help with Iran. We’ll win it one way or the other, peacefully or otherwise," Trump said.

However, US Secretary of State Marco Rubio said to Fox News, while boarding Air Force One, that Washington hopes to convince Beijing to play a “more active role” in resolving the Iran crisis, South China Morning Post (SCMP) reported.

Beijing has the potential to pressure Tehran to reach a deal with the US, given that China is the biggest oil buyer of Iran.

FIIs keep paring their stake in Indian stock market

So far in May, Foreign Institutional Investors (FIIs) have remained net sellers in seven of eight trading days and have offloaded their stake worth Rs. 26,172.45 crore. Amid growing concerns regarding India Inc.’s earnings projections due to higher energy prices, foreign investors continue to dump their stake in the Indian stock market.

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

A firm US Dollar also supports USD/INR

The continued outperformance by the US Dollar due to traders becoming increasingly confident that there will be no interest rate cuts by the Federal Reserve (Fed) this year is also supporting the USD/INR pair.

At the press time, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, is flat around 98.45, but is close to its weekly high of 98.60 posted on Wednesday.

According to the CME FedWatch tool, the odds of the Fed holding interest rates at their current levels or delivering at least one interest rate hike this year are 66.8% and 32.2%, respectively.

Traders pare dovish Fed bets after the US Consumer Price Index (CPI) data release on Tuesday, which showed that the headline inflation accelerated to 3.8% Year-on-Year (YoY) in April, the highest level seen in almost three years. Before the CPI data release, the possibility of the Fed delivering at least one interest rate hike this year was 23.5%, according to the CME FedWatch tool.

Technical Analysis: USD/INR trades firmly near its all-time high of 95.88

USD/INR trades firmly at around 95.80, extending its advance above the 20-day exponential moving average (EMA) at 94.68 and keeping a clear bullish near-term bias. The pair is supported by this rising EMA, while the Relative Strength Index (RSI) near 66 suggests strong but increasingly overbought momentum, hinting that upside progress could slow even as the broader uptrend remains intact.

On the downside, initial support is now seen at the 20-day EMA around 94.68, which acts as the first line of defense in case of a pullback, with the current price zone at 95.84 acting as a pivotal area for trend continuation. As long as USD/INR holds above this moving average, dips are likely to be viewed as corrective within the prevailing uptrend, while only a sustained break back below the EMA would start to undermine the bullish structure.

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