CURRENCY OVERVIEW

 The Rupee opened stronger on Monday waiting for the Federal Reserve's widely expected interest rate cut this week, a move that may not relieve pressure on the currency that has plumbed to lifetime lows for two straight weeks. Attention is now trained on the Fed's September 16–17 meeting, where a 25-basis-point rate cut is widely expected. Beyond the decision itself, markets will scrutinize the forward guidance and rate projections for signals on the likelihood of further cuts in 2025. In the run-up to the meeting, a weaker dollar may support the rupee, though gains for the rupee are expected to be limited and the currency is likely to underperform Asian peers, analysts at HDFC Bank said in a note. Meanwhile, India's 10-year benchmark 6.33% 2035 bond yield settled at 6.4867% on Friday, largely unchanged from the previous week. Traders anticipate the yield will remain in the 6.40% to 6.52% band this week. The yield might fall to 6.40% only if the Fed hints at an additional 50-bp rate cut in the next quarter, they said. Bond yields have eased off recent highs, as fears of fiscal slippage and additional supply were addressed after the Indian Finance Minister Nirmala Sitharaman said the government will meet its budget deficit target and there will be no changes in the borrowing calendar. Traders say a rally in bond prices and break of the crucial 6.40% mark will need support from the central bank. The dollar held steady on Monday ahead of a pivotal week filled with central bank decisions led by the Federal Reserve, while the euro hardly reacted to Fitch's downgrade of France's credit rating. Trading in Asia was thinned with markets in Japan closed for a holiday, leaving currencies mostly rangebound in the early session. The euro last traded 0.09% lower at $1.1724, with investors mostly brushing off Friday's announcement from Fitch to downgrade France's sovereign credit score to the country's lowest level on record. The move strips the euro zone's second-largest economy of its AA- status as it grapples with political crisis and ballooning debt. Still, much of investors' attention this week will be on the slew of rate decisions in the U.S., Japan, United Kingdom, Canada and Norway that could set the tone for markets, with the Fed taking centre stage. Expectations of a rate cut from the Fed on Wednesday have weighed on the dollar in recent times, though it last steadied at 97.65 against a basket of currencies on Monday. Sterling was little changed at $1.3554, while the Aussie dollar hovered near a 10-month high at $0.6652. In other currencies, the New Zealand dollar eased 0.03% to $0.5953, while the offshore yuan was little changed at 7.1230 per dollar. U.S. and Chinese officials concluded a first day of talks in Madrid on Sunday on their strained trade ties and a looming divestiture deadline for Chinese short-video app TikTok, amid Washington's demands that its allies place tariffs on imports from China over its purchases of Russian oil. Oil prices were little changed on Monday as investors assessed the impact of Ukrainian drone attacks on Russian refineries that could disrupt its crude and fuel exports, while also eyeing U.S. fuel-demand growth. Brent crude futures edged up 3 cents to $67.02 a barrel by 0009 GMT while U.S. West Texas Intermediate crude was at $62.77 a barrel, up 8 cents.

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