Oil Price Decline Strengthens Indian Rupee, Weakens US Dollar

Following the announcement of a ceasefire between Israel and Iran, oil prices have fallen sharply, leading to a decline in the U.S. dollar and boosting currencies like the Indian Rupee. The retreat in crude oil prices has alleviated geopolitical risk concerns, strengthening the Indian Rupee and supporting gains in Indian equities, with the Nifty 50 rising about 1%. U.S. President Donald Trump confirmed the ceasefire and urged both nations to maintain it, which helped ease market tensions. The correlation between crude oil prices and the U.S. dollar has intensified recently, with falling oil prices contributing to renewed downside risks for the dollar, especially amid signals from Federal Reserve officials about potential interest rate cuts. This environment has prompted investors to reduce exposure to dollar-denominated assets, driving the dollar to multi-year lows, while Asian currencies and regional equities have benefited. Despite the dollar's weakness, some analysts caution that uncertainties about U.S. tariffs and data momentum suggest a slower pace of dollar decline moving forward.