CURRENCY OVERVIEW

The Rupee opened steady but  is likely to struggle to sustain its move past the 90-per-dollar mark on Thursday, with dollar strength and hedging demand weighing on the currency. The rally was largely intervention-driven, with aggressive dollar selling by the Reserve Bank of India, resembling a strategy it deployed multiple times in 2025 to break one-way moves. Bankers said that after the rupee rose past 90 per dollar, there was a noticeable pickup in hedging activity from importers, alongside renewed interest in building long dollar positions, with the move seen offering more attractive levels instead of signalling a shift in the underlying trend. The rupee faces mild headwinds from a firmer dollar index, with most Asian peers weaker amid a tepid risk backdrop. U.S. data out on Wednesday was mixed. The U.S. labour market remained subdued, data showed, with job openings falling more than expected in November and hiring easing. At the same time, services activity picked up unexpectedly in December, suggesting the economy finished 2025 on a firmer footing. The services data beat all expectations for December and was remarkably robust, ING Bank said in a note, highlighting that the reading was the highest since October 2024. The dollar was calm on Thursday as investors weighed a slew of data that showed the U.S. economy was in a delicate position ahead of a crucial jobs report on Friday, with rising geopolitical tensions keeping sentiment in check. The euro was steady at $1.1678 in early Asian hours, on course for a small weekly drop, while sterling bought $1.34605. The yen was flat at 156.78 per U.S. dollar as traders remained reluctant in placing major bets. The Australian dollar fetched $0.6721, just below the 15-month high it touched earlier this week, while the New Zealand dollar was little changed at $0.5769. The services sector activity though unexpectedly picked up in December, suggesting the economy ended 2025 on a solid footing. The spotlight will now be on the closely-watched nonfarm payrolls report due on Friday. Traders are pricing in at least two rate cuts from the Federal Reserve this year, although a divided central bank indicated in December just one more cut for 2026. Markets broadly expect the Fed to stand pat on rates in January. The dollar index , which measures the U.S. currency against six rivals, was steady at 98.737 and set for a small gain for the week. The dollar is coming off its worst annual performance since 2017, with analysts predicting another year of decline, albeit a more modest drop. Markets have mostly taken in stride the geopolitical worries across the globe after the U.S. intervention in Venezuela and the rising tensions between China and Japan this week, with currencies mostly calm through the week. Oil prices steadied on Thursday after their recent slide, while stocks were off to a rocky start as investors assessed the implications of deepening geopolitical tensions and mixed U.S. labour market data. Oil prices have slid this week on the prospect of higher Venezuelan crude output, though they recovered on Thursday, with U.S. crude rising 0.7% to $56.38 a barrel, while Brent crude futures advanced 0.68% to $60.37 per barrel.

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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