CURRENCY OVERVIEW

The Rupee closed marginally weaker on Wednesday, lagging Asian peers, on dollar demand linked to maturing non-deliverable forwards positions and month-end importer demand, while positive cues from a broad-based decline in the greenback capped losses. The currency has weakened about 2% so far this month, making it the worst performer among its Asian currencies, as investors continue to fret over persistent foreign portfolio outflows from equities. Outflows have already touched $4 billion in January. On the day, intermittent dollar sales from state-run banks and likely central bank presence in the non-deliverable forwards market helped limit the currency's losses, according to traders. Most Asian currencies, meanwhile, were up between 0.1% and 0.9% while the dollar index struggled to meaningfully bounce back from a four-year low hit in the previous session after President Donald Trump brushed off its recent weakness. While there is no change expected in benchmark borrowing costs, the focus will be on commentary from Fed Chair Powell regarding the future interest rate trajectory and the ongoing challenges to the independence of the U.S. central bank. The dollar rose against a basket of currencies on Wednesday, rebounding from a four-year low touched in the prior session, after Treasury Secretary Scott Bessent reaffirmed the United States' preference for a strong dollar. The dollar index , which measures the U.S. currency's strength against a basket of peers, rose 0.5% to 96.391. The index sank as low as 95.86 on Tuesday, its weakest since February 2022, after U.S. President Donald Trump brushed off this month's slide, emboldening dollar bears. The dollar index is down nearly 2% for the year, after falling 9.4% last year. The dollar has been under pressure due to several factors: expectations of continued Federal Reserve rate cuts, tariff uncertainty, policy volatility including threats to Fed independence and rising fiscal deficits, all of which have eroded investor confidence in U.S. economic stability. On Tuesday, the euro topped $1.2 for the first time since 2021, the pound hit 4-1/2-year highs, while the yen is set for its strongest monthly performance against the dollar since April, supported by speculation of joint Japanese-U.S. official intervention to support the Japanese currency. The euro was last down 0.8% at $1.1942. The Japanese yen has been a major beneficiary of the recent drop in the dollar, surging over 4% over the three sessions through Tuesday. On Wednesday, the Japanese currency was 0.9% lower against the dollar. Oil prices rose to their highest since late September ?on Wednesday after a winter storm disrupted U.S. crude production while a weak U.S. dollar and continued Kazakh outages ‌lent further support. Brent crude futures were up 43 cents, or 0.64%, to $68 a barrel at 11:40 a.m. ET (1640 GMT). U.S. West Texas Intermediate crude was up 53 cents, or 0.85%, at $62.92.

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The rupee closed modestly weaker on Wednesday as dollar demand from local corporates and on account of maturing positions in the non-deliverable forward (NDF) market blunted positive cues from gains in most regional peers. The rupee ended at 89.7850 per U.S. dollar, down about 0.1% on the day. Most Asian currencies edged higher but traders said local flow dynamics continued to dominate price action for the rupee, even though it has bounced back from the record-low levels hit last week. The maturity of positions in the NDF market also spurred dollar-buy bids at the daily reference rate, a trader at a Mumbai-based bank said. While price-action in the spot market was largely contained, dollar-rupee forward premiums declined sharply after the Reserve Bank of India announced it will conduct a 3-year $10 billion FX swap next month. The 1-month dollar rupee forward premium fell nearly 15 paisa and the 3-year forward premium was down over 50 paisa. The Japanese yen gained modestly against the U.S. dollar on Wednesday as traders focused on whether weakness in the Japanese currency will prompt officials in the country to intervene. Volumes are light ahead of Thursday’s Christmas Day holiday, when U.S. and many international markets will be closed. The Japanese currency was last up 0.25% on the day against the U.S. dollar at 155.84 per dollar. The dollar reached 157.77 yen on Friday. The dollar was otherwise mixed. The dollar index , which measures it against a basket of other currencies, including the yen and the euro, rose 0.07% to 97.96, with the euro down 0.14% at $1.1778. Sterling weakened 0.13% to $1.3498. The Australian dollar strengthened 0.07% to $0.6705 and the Canadian dollar gained 0.11% to C$1.367 per U.S. dollar. The U.S. currency has fallen this year as the Federal Reserve cuts rates, with more easing expected next year while analysts expect other central banks to have completed their rate reductions. Oil settled marginally lower on Wednesday, and prices were on course for their steepest annual decline since 2020 as investors weighed U.S. economic growth and assessed the risk of supply disruptions from Venezuela and Russia. Brent crude futures closed down 14 cents, or 0.2%, at $62.24 a barrel, while U.S. West Texas Intermediate crude eased 3 cents, or 0.05%, to $58.29

The rupee closed weaker on Friday , pressured by dollar demand linked to maturing non-deliverable forward positions and corporate hedging as global markets awaited a key U.S. Supreme Court ruling on trade tariffs. The currency closed at 90.1625 against the U.S. dollar, down 0.1% on the day but little changed week-on-week. Traders pointed to heightened dollar demand at the central bank's daily reference rate and hedging activity from companies, which weighed on the local unit on Friday. State-run banks were intermittently spotted offering dollars near the day's low for the rupee, which helped limit its losses, two traders said. The central bank stepped in firmly to shore up the currency earlier in the week, but traders said the rupee remains vulnerable without progress in U.S.-India trade talks, or a reversal in portfolio outflows. The dollar gained on Friday after data showed slower than expected U.S. jobs growth, suggesting the Federal Reserve could leave interest rates unchanged later this month. The dollar rose marginally across peer currencies as the data before paring those gains. The greenback was up 0.72% to 158 against the Japanese yen and was up 0.25% to 0.801 against the Swiss franc . The euro was down 0.22% against the dollar at $1.1633. The dollar index rose 0.27% to 99.14. Oil prices rose on Friday on concerns about potential disruption to Iran's output and uncertainty about supply from Venezuela. Brent futures were up 50 cents, or 0.8%, to $62.49 per barrel at 1359 GMT, while U.S. West Texas Intermediate (WTI) crude was up 51 cents, or 0.9%, to $58.27.