USD/INR: Indian rupee appreciates on weak oil prices and DXY

• USD/INR has slipped near 76.00 on falling oil prices.
• The risk-on impulse has underpinned the Indian rupee against the greenback.
• The Fed has raised the interest rates by 25 bps and is determined to increase further gradually.

The USD/INR pair continues to plunge further backed by plunging oil prices and weak performance from the US dollar index (DXY) amid risk-on impulse. The major has continued its two-day losing streak and has tumbled near 76.00.

Oil prices slip near $95.00

West Texas Intermediate (WTI), futures on NYMEX, has slipped near $95.00 after the US Energy Information Administration (EIA) reported an uptick in oil stockpiles on Wednesday. The EIA reported oil stockpiles at 4.345 million barrels outperformed the market consensus and previous figure of -1.375M and -1.863M. Positive oil stockpiles sent the oil prices lower overnight, which has appreciated the Indian rupee. India, being a major oil importer is negatively sensitive to oil prices.

Fed’s interest rate policy

The announcement of the interest rate decision by the Federal Reserve (Fed) on Wednesday has brought weakness in the DXY. Fed Chair Jerome Powell featured an interest rate hike by 25 basis points (bps), which weighed pressure on the elevated DXY and eventually underpinned the Indian rupee. The Fed has announced seven interest rate hikes for 2022 to contain the inflation mess.

Apart from the weak oil prices and subdued DXY, Foreign Institutional Investors (FIIs) have returned to the Indian markets after a steep sell-off. The Indian equities plunged heavily in February amid escalating tensions between Russia and Ukraine. Therefore, FII’s capital is returning to Indian markets and eventually is appreciating the Indian rupee.