FX – WEEKLY UPDATE :

Weekly SYNOPSIS: 18/04/2025

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Currency Map:

Currency Pairs	Week CLOSE	Prior week CLOSE	% change
USD/INR	85.38	86.19	-0.93
EUR/INR	97.25	97.10	0.15
GBP/INR	113.20	112	1.07
JPY/INR	59.96	59.82	0.23

Brent Crude closed at USD 68 VS previous week close of USD 66. Gold closed at USD 3327. Nifty closed at 23851 vs prior month close of 22828. 10 Year G-SEC Yield is now at 6.50%.

Major developments: USDINR traded in the 85.35-85.85 range last week, and Rupee climbed 0.93% against USD w/w. EUR climbed 0.15% w/w and GBP climbed 1.07% w/w against Rupee.

Indian benchmark Equity indices climbed 4.4% w/w. 10 Year G-SEC Yield closed at 6.50%.

1-year fwd premia is at 2.16% p.a.

FX reserves stood at USD 677.83 bn, as on Apr 11th. Reserves climbed US D 1.5 bn w/w.

In Apr, FII’S have sold 20750 Cr of Indian Equities and sold Rs 8510  cr of debt.

Indian Equities climbed as banking results were cheered by investors. Steep climb in banking index propelled broader market. Rupee gained further, tracking gains in USD Index.

Indian CPI softened further as March CPI climbed 3.34%, the lowest since 2019. Decline in food inflation contributed to lower CPI. This opens for further rate cuts by RBI. The CPI inflation had stood at 3.61 per cent in February 2025 and 4.38 per cent in March 2024. The inflation rate in March 2025 is the lowest since August 2019, when it was 3.28 per cent. Food inflation sharply declined to 2.69 per cent, compared with 3.75 per cent in February 2025 and 8.52 per cent in March 2024.

Rupee’s upward trend will be intact till 86.50 is not broken. Further gains will face resistance at 200 day average level of 84.92. USD Index is trading below 100 and is almost at 2 year low. USD Index strength implies that USDINR may not break long term fwd curve, and hence consistent export hedging on USDINR rally matching 4% annualised decline will be beneficial till 86.50 is not breached. However, with USDINR premia at 2.15% annualised, it is also worthwhile to hedge even imports beyond 6 months on decline to 85 and below.

Hedging advise: Exports can be hedged on rally till 86.50 is not breached on the upside. Expect 85 to support USDINR pair on the downside.

Global developments: Investors are nervous over US tariff uncertainity , as businesses are hesitant to expand in this environment. A Reuters poll conducted between April 14–17 illustrates the rising unease. The probability of a US recession within the next 12 months surged to 45%, up sharply from 25% in March and marking the highest reading since December 2023. All 45 economists who responded to a related question said that tariffs have negatively affected business sentiment, with nearly half describing the impact as “very negative.” Inflation is also expected to climb.

Federal Reserve Chairman Jerome Powell signaled  that the Fed was focused on ensuring the impact of tariffs doesn’t manifest into an ongoing inflation problem at a time when trade tensions threaten to put the central bank’s stable inflation and maximum employment goals on a collision course.

“Our obligation is to keep longer-term inflation expectations well anchored and to make certain that a one-time increase in the price level does not become an ongoing inflation problem,” “We may find ourselves in the challenging scenario in which our dual-mandate goals are in tension,” Powell said. Under this scenario, the Fed’s monetary policy decisions would consider “how far the economy is from each goal, and the potentially different time horizons over which those respective gaps would be anticipated to close,” he added.

US retail sales rose 1.4% mom to USD 734.9B in March, slightly above expectation of 1.3% mom. 

ECB cut its deposit rate by 25 bps points to 2.25% as widely expected, but the more notable shift came in the tone of its accompanying statement. ECB completely removed the reference to its policy stance being “restrictive,” a phrase that had previously signaled a bias toward further monetary easing.

The central bank emphasized that it will maintain a data-dependent, meeting-by-meeting approach and is “not pre-committing to a particular rate path” given the exceptional levels of uncertainty.

ECB acknowledged that rising global trade tensions have begun to weigh on business and household confidence and hence downside risks to growth.

BoJ Governor told the Japanese parliament that uncertainty surrounding US policy, especially tariffs, has “heightened sharply” in recent weeks. He stressed that the central bank will assess trade-related developments at each policy meeting without any pre-conception.

Currency technical levels: USDINR: 85 (Supports), 85.80/86.15 (resistance),

EURINR:95.40(Support),

GBPINR: Supports: 110.20( supports), Resistance:114.70(Resistance).

JPYINR: Resistance:61.40/62.45, Supports: 58.10 (support).

 

Hedging advise:

USDINR payables be hedged at 85.

EUR receivables be covered as per comfort.  

GBP receivables can be covered at 114+.

 

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