CURRENCY OVERVIEW

The Rupee opened strong on Wednesday from choppy oil prices and foreign outflows from the country's equity market, ?with conflicting signals on a possible Iran de-escalation keeping traders cautious ‌on the currency's ability to hold past the 92-per-dollar mark. Bankers said that while the rupee’s downside risks have diminished in the ?wake of the central bank's intervention and a pullback in crude oil ?prices, lingering Iran-war related risks and outflows from Indian equities could still ?limit any sustained recovery. Brent crude has retreated to around $88 a barrel, well below ?the near-$120 peak reached at the height of concerns over supply disruptions from the Iran war. Higher oil prices are a key risk for net energy importer India. The dollar held its ground on Wednesday as traders moved to the sidelines, awaiting ?cues on what comes next in the U.S.-Israeli war with Iran while mixed messages on a resolution to the conflict ‌kept sentiment frail. The dollar, which has surged as the more than week-long ?war sent oil prices soaring, has given up some of those gains on hopes of a swift resolution, but analysts remain ?sceptical of the conflict ending so soon. Raising the stakes for the ?global economy, Iran's Islamic Revolutionary Guard Corps said it would block oil shipments from the Gulf unless U.S. and Israeli attacks ceased. The euro last bought $1.16205 in early Asian hours, slightly stronger than the three-month low it touched on Monday. Sterling ‌was ?0.12% higher at $1.34305. The dollar index , which measures the U.S. unit against six other rivals, was at 98.876, inching away from the three-month top hit on Monday. The risk-sensitive Australian dollar hovered close to the nearly four-year high it touched on Tuesday and last bought $0.713. Much of the Aussie's gains came after Reserve Bank of Australia Deputy Governor Andrew Hauser on Tuesday warned that the spike in oil prices would ?push inflation higher and add to ?pressure for a rate rise ?at its policy meeting next week. Fed funds ?futures traders are now pricing in 39.7 basis points of cuts by year-end, indicating doubts over whether the U.S. central bank will make a second 25-basis-point cut this year. Investor focus will be on the U.S. inflation data for February later on Wednesday. It is expected to show ?that core ?consumer prices rose by 0.2% during the month while headline prices rose by ?0.3%, according to economists polled by Reuters. Oil prices dropped on ?Wednesday after the ‌Wall Street Journal reported the International Energy ?Agency has ?proposed the largest release ?of oil reserves ?in its history ?to bring down crude prices that have ?soared amid the ?U.S.-Israel war with Iran. Brent ‌futures ?were trading down 23 cents, or 0.26% lower, at $87.57 ?a ?barrel ?at 0023 GMT. U.S. ?West Texas Intermediate (WTI) ?lost ?37 cents, or 0.44%, to ?trade ?at $83.08 a ?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.