Indian Rupee faces pressure as Fed’s monetary policy decision approaches

• Ahead of the Fed’s policy decision, the Indian Rupee weakens against the US Dollar.
• Interest rates are expected to remain unchanged at the Fed’s meeting.
• Rising oil prices have put pressure on the Indian Rupee.

A recovery in oil prices and caution before the Federal Reserve’s (Fed) monetary policy decision are among the headwinds weighing on the Indian Rupee (INR) on Wednesday. Having surrendered its early gains, the Rupee slips slightly against the US Dollar (USD), with USD/INR edging towards 95.16 as the Indian currency underperforms.

At the start of trading, the MCX Crude Oil contract expiring on 19 November stands near Rs. 9,671, up 1.82% and approaching its recent highs of Rs. 9,828.

For economies such as India, where imported oil meets a substantial share of energy requirements, rising crude prices are unfavourable for their currencies.

Oil rises after Houthis target Saudi Arabia’s largest refinery

According to a military spokesperson for Yemen's Iran-aligned Houthis on Tuesday, the group fired a ballistic missile towards the Ras Tanura oil refinery in eastern Saudi Arabia, the kingdom’s largest refinery, Reuters reported.

Oil prices have risen as the attack heightens concerns over a further escalation in risks to energy supplies.

United States (US) Treasury yields have also received support from higher oil prices, reducing the attraction of riskier currencies such as the Indian Rupee. At the time of writing, the yield on 10-year US bonds stands near 5.02%, up 0.46%.

Fed decision takes centre stage

An unchanged interest rate range of 3.75%-4.00% is expected from the Fed, according to the CME FedWatch tool. The monetary policy announcement later in the day will provide the main catalyst for global markets.

At its September meeting, the Fed raised interest rates by a quarter of a percentage point, while its dot plot indicated at least one further increase this year.

Following that September announcement, financial markets were confident of another Fed increase in October. Those hawkish expectations subsequently eased, however, after several policymakers indicated that a further rate rise was not urgent.

Waller’s call for further, slower rate rises keeps Dollar bulls alert

An FXS Speechtracker score of 8/10, compared with a historical average of 7.2/10, highlights the distinctly hawkish tone of Fed official Waller’s remarks and a preference for additional tightening. His assertion that “more hikes [are] needed”, alongside the qualification that they “do not need to come at consecutive meetings”, points to a higher terminal rate reached through a more flexible sequence of increases. For the Dollar, support comes from expectations that restrictive policy will last longer, rather than from a rapid succession of near-term rate rises. Waller’s focus on persistent sources of inflation, including AI-related investment, continuing energy shocks and a labour market that remains “solid and stable”, underlines the risk of inflation expectations becoming unanchored after nearly 5½ years of above-target inflation. The policy bias therefore remains clearly hawkish.

With a 0.42-point increase to 138.34, the FXS Fed Sentiment Index confirmed that the speech shifted the policy tone further into hawkish territory, well beyond the neutral reading of 100. Together with the above-baseline FXS Speechtracker score, that elevated reading should support the Dollar as markets factor in a longer spell of restrictive interest rates, even if successive meetings do not consistently bring further increases.

USD/INR Retains a Bearish Technical Bias

Trading at 95.1355 on the daily chart, USD/INR remains below its 20-period exponential moving average (EMA) of 95.3253, leaving the near-term outlook bearish. Failure to regain this short-term average indicates that rallies are attracting selling. Meanwhile, a Relative Strength Index (RSI) reading of around 44 lies in neutral-to-soft territory, pointing to limited upward momentum rather than outright oversold conditions.

The 20-day EMA at 95.3253 provides the first resistance level. A sustained move above it would be required to relieve immediate downward pressure and allow a more substantial recovery. With the available indicators offering no clearly defined support levels nearby, price behaviour around this EMA remains the main focus. Continued trading below it is likely to maintain the short-term bearish bias.

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