Finance

Indian Rupee drops amid surging US Treasury Yields

July 30, 2026 4:31 AM GMT · FXStreet

The Indian Rupee corrects against the US Dollar as US bond yields surge.
The Fed left interest rates steady and warned of upside inflation risks.
Oil prices will likely remain higher amid escalating US-Iran war.

The Indian Rupee (INR) drops against the US Dollar (USD) on Thursday. The USD/INR pair edges down to near 95.60, with the Indian currency facing a tough fight against higher United States (US) Treasury Yields.

In the Asian session, 10-year US Treasury Yields are 1.8% higher at around 4.71%, the highest level seen in 18 months. Higher US bond yields diminish the appeal of risk-sensitive currencies.

The US Dollar has also attracted some bids in the early session on Thursday after a significant fall the previous day, following the Federal Reserve’s (Fed) monetary policy announcement. At press time, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, trades 0.12% higher to near 100.93.

Upside US inflation risks boost Treasury Yields

In the monetary policy announcement on Wednesday, the Fed decided to leave interest rates unchanged in the range of 3.50%-3.75% for the fifth meeting in a row. The decision was expected to be a hold at a time when a resurgence in oil prices due to escalating Middle East conflicts has de-anchored inflation projections again.

The meeting was also under political pressure, as US President Donald Trump has criticized the Fed several times for not reducing interest rates. Before the meeting, Trump said Fed Chairman Kevin Warsh wanted to lower interest rates, adding that there was a good inflation report recently, costs were falling rapidly, and prices should drop significantly once the Gulf War ends.

In the monetary policy statement and the press conference, Fed Chair Warsh stressed several times bringing inflation down, and clarified that the central bank won’t hesitate to act if needed.

US bond yields are surging on expectations that the Fed needs to raise interest rates anytime this year to achieve price stability.

We think the ⁠market is ultimately telling us (and Warsh) that talk is cheap with the combination of these moves, and that it is not enough to just say and proclaim that price stability is paramount," MUFG ⁠Bank said in a note, Reuters reported. They added, "In other words, the Fed has to eventually walk the talk on inflation under this new regime."

Middle East tensions keep key oil shipping lanes constrained

Oil prices traded lower in the early trade on Thursday even as military aggression between the US and Iran continues. Earlier in the day, Iranian media said the US military hit the south-western Iranian city of Abadan as well as Qeshm Island.

At press time, the MCX Crude Oil contract expiring on August 19 trades 1.1% lower at around Rs. 8,030.

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.

The odds of oil prices rising higher remain firm on the assumption of a squeezed global energy supply due to escalating Middle East conflicts.

According to TD Securities, the renewed flare-up in regional tensions is adding to supply-side concerns in energy markets. Strategists there highlight that “the return of Iranian-US strikes after a multi-day pause, along with continued Houthi risks for Saudi energy infrastructure, are keeping flows in both the Strait of Hormuz and Bab el-Mandeb heavily constrained,” underscoring the ongoing vulnerability of critical crude and product shipping routes.

Technical Analysis: USD/INR regains ground near 95.50

USD/INR trades slightly higher at around 95.61 at press time, but is maintaining a mildly bearish near-term bias as it holds below the 20-day exponential moving average (EMA) at 95.86. The pair has retreated from recent highs, and the 20-day EMA now acts as immediate overhead supply, hinting at a market that is losing upside traction.

The Relative Strength Index (RSI) at 47.76 sits just below the neutral 50 line, suggesting a lack of strong directional momentum and reinforcing a consolidative-to-soft tone while price remains capped beneath the short-term EMA.

On the topside, initial resistance is located at the 20-day EMA at 95.86, and a sustained break above this level would be needed to ease the current bearish bias and reopen the path toward the recent high of 97.10. Looking down, the key support level for the pair is 95.00.

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

Economic Indicator

Fed Interest Rate Decision

The Federal Reserve (Fed) deliberates on monetary policy and makes a decision on interest rates at eight pre-scheduled meetings per year. It has two mandates: to keep inflation at 2%, and to maintain full employment. Its main tool for achieving this is by setting interest rates – both at which it lends to banks and banks lend to each other. If it decides to hike rates, the US Dollar (USD) tends to strengthen as it attracts more foreign capital inflows. If it cuts rates, it tends to weaken the USD as capital drains out to countries offering higher returns. If rates are left unchanged, attention turns to the tone of the Federal Open Market Committee (FOMC) statement, and whether it is hawkish (expectant of higher future interest rates), or dovish (expectant of lower future rates).