CURRENCY OVERVIEW
The Rupee opened to a record low on Monday, as ?an escalating Middle East conflict stoked worries over sustained disruption of energy supplies, threatening the outlook for Asia's third-largest economy. Asian currencies were ?down between 0.1% to 0.8% as hopes ?for an off-ramp to hostilities dimmed over the weekend with Washington and Tehran trading threats as ?the war entered its fourth week. The currency ?has fallen 3% this month, hitting an all-time low of 93.7350 ?on Friday, with higher oil prices exacerbating risks to India’s ?current account deficit, feeding into inflation pressures and clouding the growth ?outlook. The rise in ?U.S. Treasury ?yields and persistent equity outflows are compounding the pressure on the rupee, already weighed down by importer-hedging demand, ?particularly from oil companies, bankers said. The 10-year U.S. Treasury ?yield climbed ?more than 10 basis points on Friday and inched up further in Asia to top 4.4%. The selloff in European bonds and worries over inflation ?prompted ?investors to demand higher yields. Foreign investors have ?pulled out alomst $10 billion from Indian equities this month, reflecting concerns over the impact of higher ?oil prices on India’s economy.The ?conflict has boosted oil prices by over 50% this ?month. The International Energy Agency has said the crisis is worse than the two oil shocks of the 1970s put ?together. The rupee, ?among the ?currencies most exposed to sustained oil price increases, has weakened ?about 3% since the war ?began. The dollar rose on Monday as escalating retaliatory ?threats in the Middle East conflict curbed risk appetite and lifted demand for safe-haven assets. The Australian dollar, a liquid proxy for global sentiment, slid as equities sold off across Asia. Japan's top currency diplomat said his government is ready to take action to counter foreign-exchange volatility as the yen edged lower. The dollar index , which measures the U.S. currency against a basket of peers, advanced 0.08% to 99.62. The gauge on Friday closed out its first weekly decline since the start of the war, as surging oil prices on inflation prompted central banks to turn hawkish. The euro slid 0.16% to $1.1552, as the yen weakened 0.14% to 159.45 per dollar. Sterling fell 0.06% to $1.3331. The conflict broadened ?on Monday, with Israel announcing wide-scale strikes on Tehran, while Saudi Arabia said two ballistic missiles had been launched at Riyadh. With the yen weakening back toward the key 160 per dollar level, Japan's top currency diplomat Atsushi Mimura signaled caution about speculative activity in oil markets spilling over into foreign exchange. Brent crude futures fell 1 cent to $112.18 a barrel by 0202 GMT after settling on Friday at their highest since July 2022. U.S. West Texas Intermediate was at $98.75 a ?barrel, up 52 cents, after the previous session's gain of 2.27%.
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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.