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Indian Rupee declines due to rising hawkish Fed bets, renewed Middle East war

  • The Indian Rupee opens on a negative note against the US Dollar.
  • The US Dollar gains as surprisingly strong US NFP numbers boost hawkish Fed bets.
  • Renewed Israel-Iran war has prompted oil prices.

The Indian Rupee (INR) starts the week on a negative note against the US Dollar (USD), with the USD/INR pair rising to near 95.30. The pair gains at open as surprisingly upbeat United States (US) Nonfarm Payrolls (NFP) data for May has strengthened the US Dollar, and rising oil prices due to re-escalating conflicts between Iran and Israel have weakened the Indian Rupee.

During the press time, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, holds onto Friday’s gains around 100.00, the highest zone seen in two months.

Upbeat US NFP data prompts hawkish Fed bets

On Friday, the US Bureau of Labor Statistics (BLS) reported surprisingly upbeat official employment data for May. The US NFP arrived significantly higher at 172K against 85K estimates. Meanwhile, the April reading was also revised higher to 179K from 115K. The Unemployment Rate remained steady at 4.3%, as expected. Strong job growth data, compounded with already high inflationary pressures, have resulted in a significant increase in hawkish Federal Reserve (Fed) bets.

The CME FedWatch tool shows that the possibility of the Fed delivering at least one interest rate hike this year has increased to 73.8% from 45.2% seen a week ago.

Oil prices jump on renewed Middle East conflicts

The attacks from Israeli Defense Forces (IDF) in western and central Iran over the weekend, despite US President Donald Trump urging Israeli Prime Minister Benjamin Netanyahu not to retaliate against Iran’s attacks, have renewed fears of an all-out war in the Middle East.

Iran fired ballistic missiles at Israeli military targets over the weekend in retaliation for Israeli aggression in Lebanon.

Rising hostilities in the Middle East have raised concerns over the US-Iran peace deal, prompting fears of a prolonged closure of the Strait of Hormuz, which has resulted in a sharp increase in oil prices. As of writing, the MCX Crude Oil contract expiring on June 18 is up 4.6% to near 9,020.

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.

FIIs continue to remain net sellers in Indian stock market

So far in June, Foreign Institutional Investors (FIIs) have remained net sellers on all trading days, and offloaded their stake worth Rs. 30,814.47 crore. Overseas investors also remained net sellers in May and pared their stake worth Rs. 55,963.33 crore. Foreign investors are dumping their investments in the Indian stock market due to growing concerns over India Inc.’s earnings projections amid higher oil prices.

Technical Analysis: USD/INR attarct bids near 95.00

USD/INR trades higher at around 95.30 with a mildly bearish near-term bias, holding just under its 20-day exponential moving average (EMA) at 95.4320. The pair has retreated from recent highs and the loss of traction against this short-term EMA hints that upside momentum is fading, while the Relative Strength Index (RSI) around 49 suggests neutral momentum rather than a clear directional push.

On the downside, immediate focus is on whether sellers can keep the pair capped beneath the 20-day EMA at 95.4320, which now acts as the first area of supply limiting rebounds. A sustained daily close back above this moving average would ease the current pressure and open the door to a further slippage towards the May 7 low around 94.00. Looking up, the pair needs to return above the 20-day EMA to ease downside pressure, and a further rally above the June 4 high at 96.30 would allow it to reclaim the all-time high around 97.10.

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AUD/JPY Strengthens above 113.00, hawkish RBA supports uptrend above 100-day SMA

  • AUD/JPY gains ground to near 113.05 in Monday’s early Asian session. 
  • Positive outlook for the cross prevails above the 100-day SMA, further consolidation cannot be ruled out with fading RSI momentum. 
  • The first upside barrier emerges at 113.90; the initial support level to watch is 112.90. 

The AUD/JPY cross trades in positive territory around 113.05 during the early European trading hours on Monday. A hawkish stance from the Reserve Bank of Australia (RBA) underpins the Australian Dollar (AUD) against the Japanese Yen (JPY). 

RBA Governor Michele Bullock last week emphasized that the Australian central bank remains strictly focused on curbing inflation, following three interest rate hikes earlier this year that pushed the cash rate to 4.35%. Bullock further stated that inflation is too high, and the board will do what it considers necessary to achieve our mandate to deliver price stability and full employment.

However, the potential upside for the cross might be limited amid intervention fears from Japanese authorities. Japanese Finance Minister Satsuki Katayama said on Friday that officials are monitoring the situation and reserve the right to take “decisive action” and “respond appropriately at any time” against excessive volatility. 

Chart Analysis AUD/JPY

Technical Analysis:

In the daily chart, AUD/JPY holds in a constructive stance above the 100-day simple moving average, while the Bollinger lower band adds nearby downside protection, keeping the broader uptrend intact despite the recent pullback from highs. The Relative Strength Index (RSI) at 43.94 has slipped below the neutral 50 line, hinting at fading bullish momentum but not yet signaling a decisive trend reversal as price still sits comfortably over the major average.

On the topside, initial resistance emerges at the Bollinger middle band around 113.90, with the Bollinger upper band at 114.90 acting as the next bullish target if buyers regain control. On the downside, a daily close back under the 112.90 lower band would expose the 100-day SMA at 111.60, where stronger demand would be expected to appear while the medium-term bullish structure remains in place above that level.

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CHF declines as safe-haven demand supports US Dollar

  • USD/CHF rises as safe-haven US Dollar demand increased after Israel intercepted a missile fired from Yemen.
  • The Greenback may further advance as strong US jobs data boost expectations of a Fed interest rate hike this year.
  • The Swiss Franc struggles after May inflation fell to 0.6%, missing the 0.8% forecast and reducing rate hike expectations.

USD/CHF extends its gains for the second successive day, trading around 0.7970 during the Asian hours on Monday. The pair gains ground as the US Dollar (USD) remains firm amid increased safe-haven demand after the Israeli military stated a missile had been launched from Yemen towards Israeli territory, which has been intercepted by its aerial defense systems.

The Guardian reported that air raid sirens sounded in Tel Aviv, following the attack from Yemen. The retaliatory attacks from Yemen, whose military force, the Houthis, is backed by Iran, reflect that conflicts in the Middle East have started again.

The BBC reported on Monday that the Israel Defense Forces (IDF) reportedly struck military targets in Iran following an Iranian missile salvo aimed at northern Israel. This escalation occurred despite US President Donald Trump’s criticism of previous Israeli strikes in Beirut and his active push for a diplomatic resolution between Prime Minister Netanyahu and Tehran.

Earlier, Iran launched multiple rounds of missiles toward Israel, warning against further military action in Lebanon and threatening a fragile ceasefire amidst stalled peace negotiations. Although Israel’s military reported that all incoming missiles were successfully intercepted with no casualties, the escalation severely rattled energy markets.

The Greenback received support after stronger-than-expected US employment data reinforced expectations that the Federal Reserve (Fed) could raise interest rates later this year. US Nonfarm Payrolls (NFP) increased by 172,000 jobs in May, compared to 179,000 (revised from 115,000) in the previous reading, and the Unemployment Rate held at 4.3% during the same period.

The Swiss Franc (CHF) weakened against the US Dollar after May’s inflation came in at 0.6%, missing the 0.8% forecast and dampening rate-hike expectations. Despite the slight rise, Swiss National Bank (SNB) Chairman Martin Schlegel noted that medium-term inflation pressures remain stable. Consequently, investors now expect the SNB to hold its key interest rate steady at 0% through 2026.

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Rupee Retreats on Rising Oil Prices

The Indian rupee edged down to around 95.3 per dollar, retreating from last week’s four-week highs as a broad selloff in Asian equities and a spike in global crude prices halted its upward momentum. Broader Asian currencies similarly weakened as optimism faded surrounding a potential US-Iran peace deal. This pullback followed a Friday rally driven by aggressive Reserve Bank of India interventions to boost dollar inflows. While economists project these measures will attract $30–$50 billion by March 2027 and limit immediate downside risks, external pressures have quickly overshadowed these gains. Sentiment was further strained by rising US Treasury yields, as stronger-than-expected May jobs data fueled expectations of a Federal Reserve interest rate hike later this year. Meanwhile, investors digested data showing India’s real GDP grew 7.8% year-on-year in the March quarter of 2026. While down slightly from the revised 8% prior, the performance comfortably beat market forecasts of 7.2%.

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Indian Rupee starts flat, higher oil prices keep outlook uncertain

  • The Indian Rupee opens flat at around 95.72 against the US Dollar with investors await the RBI’s monetary policy.
  • US President Trump said that Iran has agreed to give up its nuclear ambitions.
  • Indian government approves scrapping capital gains tax on foreign investment in government bonds.

The Indian Rupee (INR) opens flat against the US Dollar (USD) on Thursday after a strong Wednesday. The USD/INR pair holds onto previous day’s gains around 95.72 as oil prices remain higher, with United States (US)-Iran negotiations remaining in deadlock.

In the opening trade, MCX Crude Oil price opens 1.2% lower to near 9,120, but is close to its 10-day high of 9,290 posted on Wednesday.

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.

US President Trump remains confident of early deal with Iran

US President Donald Trump said in The New York Post’s “Pod Force One” program on Wednesday that Iran has agreed over not having nuclear weapons, adding, “Iran’s Ayatollah [referring Supreme Leader Mojtaba Khamenei] is involved in negotiations with Washington” and he will meet him at some time. However, Trump warned that Iran could change its mind and can pursue its nuclear ambitions.

When asked about the timeframe in which the US and Iran could reach a deal, Trump said a memorandum of understanding (MoU) between the nations could reopen the Strait of Hormuz as early as this week; however, there is a possibility that the US blockade on Iranian sea ports could last till Labor Day, September 7.

India approves scrapping capital gains tax on foreign investment in government bonds

Earlier in the day, the Cabinet meeting has approved the scrapping of capital gains tax on foreign portfolio investment in government bonds, aiming to improve the condition of foreign flows in the Indian economy.

The move was highly anticipated by the Indian government as significant Foreign Institutional Investors (FIIs) selling in the Indian stock market has been one of key reasons behind Indian Rupee’s sharp depreciation.

On Monday, FIIs also remained net sellers in the Indian equity markets, offloading their stake worth Rs. 5,616.56 crore. So far in June, overseas investors have remains net sellers in all three trading days.

RBI’s policy comes into limelight

Going forward, the major trigger for the Indian Rupee will be the Reserve Bank of India’s (RBI) monetary policy, which will be announced on Friday. The RBI is expected to hold the Repo Rate steady at 5.25% and guide a hawkish monetary policy outlook, as higher energy prices have de-anchored inflation expectations.

In the US, investors will pay close attention to the Nonfarm Payrolls (NFP) data for May, which will be released on Friday. The impact of the US NFP data will be significant on the Federal Reserve’s (Fed) monetary policy outlook.

Technical Analysis: USD/INR holds above 20-day EMA

USD/INR trades aLmost flat at around 95.72 in the opening trade. The pair maintain a modest bullish bias as it stays above the 20-day Exponential Moving Average (EMA) at 95.47. The price action consolidates near recent highs while the Relative Strength Index (RSI) at about 54.8 sits slightly above the neutral territory, suggesting steady but not overextended upward momentum.

On the downside, immediate support is aligned with the 20-day EMA around 95.47, which reinforces the underlying demand zone and would need to give way to signal a deeper corrective phase towards the June 2 low at 95.00, followed by the May 7 low at around 94.00. Looking up, the pair could reclaim the all-time high of 97.09 if it manages to rise above the May 28 high at 96.65.

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USD/JPY Price Trades below 160.00 intervention threshold; bullish bias intact

  • USD/JPY retreats from over a one-month high set on Thursday, though it lacks follow-through.
  • The Israel-Lebanon ceasefire weighs on the USD and the currency pair amid intervention fears.
  • The bullish technical setup warrants some caution before positioning for any corrective decline.

The USD/JPY pair attracts some sellers during the Asian session on Thursday amid fears that authorities will step in again to prop up the Japanese Yen (JPY). Furthermore, the Israel-Lebanon truce prompts some profit-taking around the US Dollar (USD) and exerts downward pressure on the currency pair.

Spot prices, however, lack follow-through and remain close to the 160.00 psychological mark or over a one-month high set earlier today. Economic concerns stemming from the Middle East conflict hold back the JPY bulls from placing aggressive bets. Adding to this, the uncertainty over US-Iran peace talks, along with hawkish US Federal Reserve (Fed) expectations, acts as a tailwind for the USD and contributes to limiting the downside for the USD/JPY pair.

Spot prices retain a constructive near-term tone within an upward-sloping channel. The lower boundary of the said channel coincides  with the 200-period simple moving average (SMA), which acted as a tailwind for the USD/JPY pair on Wednesday. Meanwhile, the Relative Strength Index (RSI) hovers above the midline, suggesting modest bullish momentum even as the Moving Average Convergence Divergence (MACD) flattens slightly below zero.

Momentum indicators hint at a slower advance rather than a sharp reversal. Hence, any corrective pullback might continue to attract fresh buyers near the 159.45 confluence support. A convincing break, however, might prompt some technical selling and pave the way for deeper losses. As long as buyers defend this support band above 159.44, the broader bias stays tilted higher, and a renewed push toward the channel top at 160.14 remains the primary topside scenario.

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

USD/JPY 4-hour chart

Chart Analysis USD/JPY

Japanese Yen Price Last 30 days

The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies last 30 days. Japanese Yen was the strongest against the Canadian Dollar.

USDEURGBPJPYCADAUDNZDCHF
USD0.71%0.76%1.66%2.05%0.54%-0.02%0.83%
EUR-0.71%0.06%0.97%1.36%-0.20%-0.70%0.17%
GBP-0.76%-0.06%0.92%1.29%-0.23%-0.76%0.12%
JPY-1.66%-0.97%-0.92%0.35%-1.16%-1.66%-0.82%
CAD-2.05%-1.36%-1.29%-0.35%-1.50%-2.00%-1.16%
AUD-0.54%0.20%0.23%1.16%1.50%-0.54%0.39%
NZD0.02%0.70%0.76%1.66%2.00%0.54%0.89%
CHF-0.83%-0.17%-0.12%0.82%1.16%-0.39%-0.89%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Japanese Yen from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent JPY (base)/USD (quote).

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EUR/JPY Price Holds modest gains above 185.50, bullish bias remains intact

  • EUR/JPY trades with mild gains near 185.65 in Thursday’s early European session. 
  • The cross keep a modest bullish bias above the key 100-day SMA. 
  • The first upside barrier emerges at 186.00; the initial support level is seen at 185.15. 

The EUR/JPY cross posts modest gains around 185.65 during the early European session on Thursday. The potential upside might be limited for the cross amid fears of foreign exchange intervention from Japanese authorities. 

Japan’s Finance Minister Satsuki Katayama said on Wednesday that officials are standing ready to respond appropriately on foreign exchange if required. Katayama added that she aligns with the Bank of Japan (BoJ) governor on several matters. 

On the other hand, the hawkish stance of the European Central Bank might help limit the EUR’s losses. The ECB is likely to raise its deposit rate to 2.25% at its upcoming June policy meeting, with another increase likely in September, a Reuters poll of economists showed.

Chart Analysis EUR/JPY

Technical Analysis:

In the daily chart, EUR/JPY trades at 185.64, holding a modest bullish bias as it consolidates above the Bollinger middle band around 185.15 and the 100-day simple moving average (SMA) near 184.48. The pair is trading closer to the upper half of its recent Bollinger envelope, with the upper band near 186.02 acting as immediate overhead resistance, while the Relative Strength Index (14) around 55 suggests steady but not overstretched upside momentum.

On the topside, a daily close above the Bollinger upper band at 186.02 would open the way for a continuation of the advance toward higher highs in the coming sessions. On the downside, initial support is seen at the Bollinger middle band near 185.15, followed by the 100-day SMA at 184.48 and the lower Bollinger band around 184.28, where buyers would be expected to re-emerge if the current pullback deepens.

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CHF rises as USD slips on Israel-Lebanon ceasefire news

  • USD/CHF falls as the US Dollar struggles on easing risk aversion after Israel and Lebanon renewed their ceasefire on Wednesday.
  • The Greenback may regain its ground as strong May jobs data fuels expectations that the Fed will raise interest rates.
  • Schlegel said recently that the SNB is ready to intervene against Middle East-driven Swiss Franc overvaluation pressures.

USD/CHF halts its three-day winning streak, trading around 0.7910 during the Asian hours on Thursday. The pair depreciates as the US Dollar (USD) loses ground on easing risk aversion following the news that Israel and Lebanon on Wednesday agreed to renew a ceasefire. However, it would require a “complete cessation” of fire by Iran-backed Hezbollah. The agreement was announced in a joint statement after US-led talks in Washington.

The Israel and Lebanon do not have formal diplomatic relations, though also agreed to establish several “pilot security zones” in which the Lebanese armed forces “will take exclusive control of the territory to the exclusion of all non-state actors.”

The downside of the USD/CHF pair could be restrained as the Greenback may regain its ground amid rising expectations that the US Federal Reserve (Fed) will raise interest rates this year. Stronger-than-expected US jobs data, including the May ADP private payrolls and JOLTS job openings, suggested a resilient US labor market. These reports might prompt traders to raise their bets that the Fed will keep interest rates higher for longer.

Market expectations have shifted dramatically as the war in Iran continues to disrupt energy markets, driving up oil prices and fueling inflation. Consequently, traders are adjusting to a more hawkish outlook, with the CME FedWatch Tool now pricing in a nearly 42% probability of a Federal Reserve interest-rate hike in December.

Swiss National Bank (SNB) Chairman Martin Schlegel noted that the Swiss Franc’s real overvaluation is notably lower than its nominal overvaluation. Schlegel added that the central bank has increased its readiness to intervene in the foreign exchange market to counter safe-haven appreciation pressures driven by escalating tensions in the Middle East.