USD/INR breaks above 95.00 on easing Middle East de-escalation hopes

• The Indian Rupee declines sharply against the US Dollar amid conflicting remarks from the US and Iran on peace talks.
• US President Trump extends a pause on scheduled military action on Iran’s energy plants.
• The RBI is expected to keep interest rates on hold in the policy meeting in April.

The Indian Rupee (INR) extends opening losses against the US Dollar (USD) in afternoon trading hours in India on Friday . The USD/INR pair jumps to near 95.15 as market sentiment remains cautious amid confusion over peace talks between the United States (US) and Iran to end the war in the Middle East.

Easing Mideast de-escalation hopes revives risk-off mood

Significant efforts from US President Donald Trump to end the Middle East war are failing to uplift market sentiment due to conflicting remarks from Iran.

US President Trump has been stating that talks with Iran are going “very well”; however, comments from Tehran’s officials regarding negotiation talks indicate the opposite, keeping investors on their toes. Late Thursday, Trump announced through a post on Truth.Social that he has instructed a further postponement of scheduled military strikes on Iran’s power plants for 10 days, specifically mentioning “as per Iranian request” and expressing confidence that talks with Tehran are going very well.

However, a report from the Wall Street Journal (WSJ) has shown that peace talks mediators have dismissed claims that Iran had requested a 10-day pause on strikes on its energy plants. Mediators added that Iran is yet to deliver a final response on Trump’s 15-point plan, which forces Tehran to open the Strait of Hormuz and give up their missile program plans, but the odds that Iran will agree to those terms are very low.

FIIs selling continues to batter Indian Rupee

Signs of a disconnect between US President Trump and peace talks mediators have raised concerns of de-escalation hopes, keeping demand for safe-haven assets upbeat. As of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades close to a three-day high around 100.00.

Meanwhile, a complete end to dovish Federal Reserve (Fed) expectations for the current year is also providing strength to the US Dollar. According to the CME FedWatch tool, the odds of the Fed delivering at least one interest rate hike this year is 45%, a sharp turnaround from two interest rate cuts projected before the war started.

Due to a broader risk-off mood, Foreign Institutional Investors (FII) have been consistently paring their stake from the Indian stock market. So far in March, Foreign Institutional Investors (FIIs) have remained net sellers on all trading days and have offloaded their stake worth Rs. 1,07,009.53 crore.

On the domestic front, a Reuters poll conducted in the March 23–26 period shows that the Reserve Bank of India (RBI) will hold interest rates steady in the monetary policy announcement on April 8, as inflation expectations have de-anchored amid rising energy prices. The poll also showed that the majority of respondents see rates unchanged until at least mid-2027.

Technical Analysis: USD/INR sees more upside as 20-day EMA keeps rising

USD/INR extends the rally above 95.00 on Friday. The near-term bias is bullish as price continues to press higher above the rising 20-day Exponential Moving Average (EMA), which tracks well below spot and underpins the advance. The sequence of higher closes from mid-month keeps upside pressure in place, while the RSI at 76.54 holds in overbought territory and signals strong momentum, though it also warns that the rally would face risk of a pause if buying exhausts.

Immediate support is now at the March 24 low of 93.90, followed by the 20-day EMA near 93.06, where trend followers would look to defend the broader upswing. A deeper pullback would expose 92.39 as the next support. On the upside, the spot is in uncharted territory and could rise further towards the 96.00 area.

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