CURRENCY OVERVIEW

The Rupee closed lower on Friday, breaking below the critical 90-per-dollar mark and logging a second straight weekly decline amid persistent year-end dollar demand.  It later slid through the 90 level and closed 0.3% weaker at 90.1950, its lowest close in two weeks. Heavy dollar demand from oil importers weighed on the currency through the session, while a U.S. holiday on Thursday thinned liquidity and amplified moves, traders said. For the year-crossing week, the rupee fell 0.4% in thin trade, after dropping 0.65% last week. Meanwhile, the perception that the Reserve Bank of India wants to prevent a break of 90, a level that came into focus in the final sessions of the year following sharp gains from record low levels, further strengthened. Market participants have continued to test the level, indicating that underlying demand for dollars remains robust and risk of a wider move past 90 remains on the table, despite RBI presence. Most Asian currencies were on the back foot on the day, offering little support to the rupee. The U.S Dollar  kicked off 2026 on a stronger note on Friday after struggling against most currencies last year, as traders awaited a flurry of U.S. economic data next week, including several reports on the labor market, to gauge the path of interest rates. A narrowing interest rate difference between the U.S. and other economies helped fuel sharp gains against the dollar for most major currencies, with the exception of the Japanese yen. Economic data due next week includes a host of reports on the labor market, culminating in the government payrolls report on Friday, which should provide insight as to where the Fed's policy rate might move. The dollar index , which measures the greenback against a basket of currencies, rose 0.12% to 98.37, with the euro down 0.11% at $1.1732. Euro zone manufacturing activity fell in December to its weakest in nine months, a survey showed. The currency surged more than 13% last year, its biggest annual rise since 2017. Sterling weakened 0.04% to $1.3465 following a 7.7% increase in 2025, also its biggest yearly jump since 2017. Markets in Japan and China were closed on Friday, leading to thin trading volume. The Japanese yen weakened 0.11% against the greenback to 156.84 per dollar after rising less than 1% against the greenback in 2025. It remained close to a 10-month low of 157.89 touched in November that drew policymaker attention and raised expectations for a possible intervention by the Bank of Japan (BOJ). The BOJ hiked interest rates twice last year but that did little to support the yen performance as investors appeared to be looking for a more aggressive pace. Oil prices dipped on their first trading day of 2026 after registering their biggest annual loss since 2020 as investors weighed oversupply concerns against geopolitical risks, including the war in Ukraine and Venezuela exports. Brent crude futures lost 55 cents to $60.29 a barrel by 11:16 a.m. ET (1616 GMT) on Friday while U.S. West Texas Intermediate crude was down 53 cents at $56.89.

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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