FX – WEEKLY UPDATE :

Weekly SYNOPSIS: 09/05/2025

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Currency Map:

Currency Pairs	WEEK CLOSE	PRIOR WEEK CLOSE	% change
USD/INR	85.43	84.35	1.28
EUR/INR	96.28	94.94	1.41
GBP/INR	113.40	111.61	1.60
JPY/INR	58.92	57.74	2.04

Brent Crude closed at USD 64 VS previous week close of USD 62.40. Gold closed at USD 3324. Nifty closed at 24008 vs prior month close of 24346. 10 Year G-SEC Yield is now at 6.49%.

Major developments: USDINR traded in the 84.10-85.89 range last week, and Rupee declined 1.28% against USD w/w. EUR climbed 1.41% w/w and GBP climbed 1.60% w/w against Rupee.

Indian benchmark Equity indices declined 1.38% w/w. 10 Year G-SEC Yield closed at 6.49%.

1-year fwd premia is at 2.12% p.a.

FX reserves stood at USD 686 bn, as on May 2nd. Reserves declined US D 2.06 bn w/w.

In May, FII’S have  bought Rs 13993 Cr of Indian Equities and sold Rs 2659  cr of debt.

Rupee declined steeply to 85.77 due to worries over Indo- Pak border tensions. India stuck Pak terror infrastructure successfully. Pakistan’s attempts to hit Indian installations were foiled and India crippled Pak Air defense system in Lahore. This spooked Rupee, due to fears of conflict escalating into a full blown war. However, with ceasefire understanding and if it holds, Rupee may start to stabilise and gain. It would track Global currency movements.

India- UK free trade agreement has been signed. Focus now will be on US-India trade agreement.

Indian CPI and IIP are important data events for the week.

On a technical basis, USDINR faces resistances at 86.10 .Supports are at 85.25/85/84.55.

Hedging advise: Exports can be hedged on rally till 86.10 is not breached on the upside.

Global developments:  Global events was dominated by US-UK trade agreement. Baseline tariff of 10% on all imports remains, but US has bargained for greater access to US agri exports and industrial goods. US President noted that this would likely be the global floor for reciprocal tariffs, and that other nations may see levels above this even after negotiations have concluded. It is unclear whether this would be acceptable to other nations. If they take a harder stance during upcoming negotiations, it could delay a broader resolution to the current state of elevated trade tensions.

US-China have started discussions to reset tariffs after US President unleashed 145% tariff on China and countered by China. However, investors are wary of sudden turnarounds and are looking forward for clarity.

Fed kept rates unchanged and cautioned of higher inflation and unemployment, Fed Chairman Jerome Powell said it was unclear if the economy would continue to grow steadily, or shrink due to a potential spike in inflation. 

Powell flagged heightened uncertainty over just what Trump will do with his tariff agenda, and signaled that the central bank will not make any changes until the outlook was clear. He also noted that the U.S. economy remained relatively resilient, and flagged a largely wait-and-see approach for future interest rate decisions. He also largely ruled out a preemptive interest rate cut.

BOE cut its benchmark Bank Rate to 4.25% from 4.50%. This is the fourth rate cut. BOE nudged down the peak in inflation in the third quarter from 3.7% to 3.5% due to the recent falls in wholesale gas and oil prices. Investors have almost fully priced in three additional rate cuts by the end of the year, which would take the benchmark rate to 3.50%.

US retail sales, inflation data are crucial events for the week.

Currency technical levels: USDINR: 85.25/85/84.50 (Supports), 86.10 (resistance),

EURINR:94.50(Support), 96.80 (Resistance)

GBPINR: Supports: 111.50( supports), Resistance:114(Resistance).

JPYINR: Resistance:59.60 Supports: 57.40 (support).

Hedging advise: USDINR receivables be hedged till 86 is not broken on the upside. EUR receivables be covered as per comfort.  GBP receivables can be covered at 114+