CURRENCY OVERVIEW

The Rupee closed stronger after it logged its best single-day gain in over a month on Monday, boosted by likely dollar sales by the central bank and modest inflows that dulled the spillover from global market volatility. The liquidity impact of FX interventions has remained in focus due to their effect on money market interest rates as worries over hefty government borrowing have kept government bond yields elevated. On Monday, the rupee rose 0.5% to end the session at 91.5125 per dollar, its best one day gain since December 19. The yield on the 10-year benchmark bond rose as much as 8 basis points to 6.77%, the highest since March 2025. The pound held steady against the dollar on Monday near a multi-year high hit last week as attention focused on a Bank of England policy announcement on Thursday. Sterling was last up less than 0.1% versus the dollar at $1.3696. It hit $1.3867 last week, its highest since September 2021, but retreated on Friday as the U.S. currency strengthened after U.S. President Donald Trump nominated Kevin Warsh to lead the Federal Reserve.  Attention this week is on the BoE, with the central bank expected to hold its benchmark interest rate at 3.75% when it announces policy on Thursday, according to all but two economists surveyed by Reuters in a January poll. Data has remained robust since the last meeting when the central bank lowered the Bank Rate, while inflation remains the highest among Group of Seven industrialised peers, suggesting that the BoE can hold off from cutting rates for now. The last two meetings have seen rate-setters deeply divided, but the decision this time should be more straightforward. The commodity-linked Canadian dollar gave back some recent gains against its U.S. counterpart on Monday as oil prices tumbled and precious metals added to last week's sharp declines. The loonie was trading 0.6% lower at 1.3695 per U.S. dollar, or 73.02 U.S. cents, after moving in a range of 1.3607 to 1.3697. On Friday, the currency touched its strongest intraday level since October 2024 at 1.3479. Canadian bond yields moved higher across the curve, tracking moves in U.S. Treasuries. The 10-year was up 1.3 basis points at 3.433%. The Government of Canada said it plans to issue a new 10-year green bond this week subject to market conditions.  Oil prices fell more than $3 per barrel on Monday after U.S. President Donald Trump said Iran was "seriously talking" with Washington, signaling a de-escalation of tensions with the OPEC member, while a stronger dollar and milder weather forecasts also pressured prices.Brent crude futures fell $3.02, or 4.4%, to settle at $66.30 per barrel, while U.S. West Texas Intermediate crude futures fell $3.07, or 4.7%, to $62.14 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

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.