CURRENCY OVERVIEW

The Rupee opened weaker on Monday, though most traders see the weekly bias tilted to the weaker side with year-end outflows and positioning likely to weigh on the currency. Conversations among bankers are focused on two key factors: the magnitude of the Reserve Bank of India's intervention that reversed the rupee's slide from 91 per U.S. dollar and how much pent-up dollar  demand has resurfaced in both onshore and offshore markets following that move. Dollar demand linked to year-end NDF maturities is expected to keep the rupee under pressure, while interbank positioning remains skewed toward buying the pair on dips rather than looking for selling opportunities, he said. Beyond spot, attention this week will be on moves in the overnight swaps market and forward premiums. Bankers said excess dollar liquidity is likely to make the cost of rolling positions from Dec. 31 to Jan. 1 volatile and inflated. Heavy dollar demand in the NDF market, along with concerns over the year-end rollover cost of excess dollars, had pushed premiums to multi-year highs before the Reserve Bank of India’s FX swap announcement helped cool them. The yen recovered some ground on Monday following a steep drop at the end of last week as markets weighed the timing of more interest rate hikes in Japan and the possibility of intervention in thin end-of-year trading. Japan has a free hand in dealing with excessive moves in the yen, Finance Minister Satsuki Katayama said last week. Those intervention warnings have helped keep a lid on dollar-yen positions, but pessimism about Japan's currency is showing up in other foreign exchange crosses, said Bart Wakabayashi, Tokyo branch manager at State Street. The yen strengthened 0.3% against the greenback to 156.13 per dollar after a 0.5% slide on Friday. The dollar index , which measures the greenback against a basket of currencies, fell 0.1% to 97.96. The euro advanced 0.1% to $1.1780. The BOJ raised its policy rate to a 30-year high of 0.75% from 0.5% at its December meeting. The summary of opinions released on Monday showed many board members saw the need for further increases to the rate, which remained significantly negative in inflation-adjusted terms. In a thin economic calendar this week, the main focus will be minutes released on Tuesday from the Federal Open Market Committee's December meeting. The Australian dollar was little changed at $0.6714. New Zealand's kiwi was steady at $0.5830. Oil prices rose on Monday as investors weighed Middle East tensions that could disrupt supply, while a major hurdle remains in the Russia–Ukraine peace talks. Brent crude futures rose 56 cents, or 0.92%, to $61.20 per barrel at 0236 GMT, while U.S. West Texas Intermediate crude was up 51 cents, or 0.9%, to $57.25.

www.eforexindia.com 

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