EUR/INR: Oil Risk Tilts the Pair Higher, but Rupee Support Caps the Run

The EUR/INR closed the week at 108.87, down slightly but holding above the 106.98 support that marked the June 24 low. The pair has been recovering since that bounce, though the path higher is complicated by diverging central bank stances and a fresh oil risk premium after the US-Iran escalation.

The European Central Bank raised its deposit rate by 25 basis points at the June meeting. ECB President Christine Lagarde told the Sintra forum the bank will stay data-dependent, with future moves tied to inflation and wage data. That signals a pause, not a pivot. Eurozone flash inflation and PMI surveys due in the coming weeks will shape expectations for the September meeting.

India’s economy is growing at a faster clip than most major peers. The government is spending heavily on infrastructure and domestic defence procurement. Manufacturing PMI has stayed in expansion territory for months. The Reserve Bank of India has also stepped in to support the rupee through spot and swap interventions, traders said. Those factors give the rupee a structural floor.

The wild card is oil. India imports roughly 85% of its crude, nearly all of it through the Strait of Hormuz. The recent breakdown of the US-Iran truce has pushed Brent back above $85, adding to India’s import bill and widening the current account deficit. Higher oil prices also tend to trigger foreign portfolio outflows from Indian equities, which adds to rupee selling pressure. The eurozone imports energy too, its suppliers are more diversified, so the oil shock hits India harder.