FX – WEEKLY UPDATE :

Weekly SYNOPSIS: 30/05/2025

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Currency Map:

Currency Pairs	MAY CLOSE	APR CLOSE	% change
USD/INR	85.58	84.54	1.23
EUR/INR	96.94	96.73	0.22
GBP/INR	115.14	113.87	1.11
JPY/INR	59.36	59.62	-0.43

Brent Crude closed at USD 63 VS previous month close of USD 61. Gold closed at USD 3298. Nifty closed at 24750 vs prior month close of 24334. 10 Year G-SEC Yield is now at 6.18%.

Major developments: USDINR traded in the 83.78-86.10 range in May, and Rupee declined 1.23% against USD m/m. EUR climbed 0.22% m/m and GBP climbed 1.11% m/m against Rupee.

Indian benchmark Equity indices climbed 1.7% m/m. 10 Year G-SEC Yield closed at 6.18%.

1-year fwd premia is at 1.95% p.a.

FX reserves stood at USD 692 bn, as on May 23 rd. Reserves climbed US D 6.9 bn w/w.

In May, FII’S have  bought Rs 21445 Cr of Indian Equities and sold Rs 8498  cr of debt.

It was a roller coaster ride with Rupee swinging on either side of 85 in May. Rupee gained to 83.78 and then swiftly declined to 86.10. There was abrupt reversal to 84.78 on Monday and then a quick decline to 85.70. Rupee underperformed Asian Currencies. While Yuan gained along with Asian peers, Rupee declined. There was some correlation to Equity indices swing.

Indian GDP grew by 7.4% in Q4 and 6.5% for full FY 2024-25. FY 24-25 is the slowest growth in 4 years. CEA expects this year growth to be between 6.2 and 6.8%. Growth was 9.7% in 2020-21, 7.6% in 2022-23 and 9.2% in 23-24. Private consumption grew by 7.2% in 2024-25, and Gross fixed capital formation exhibited robust growth of 7.1%. Agri sector climbed 4.4%, mfrg climbed 4.5%, construction sector climbed 9.4%.

RBI declared dividend payout of Rs 2.7 lac Cr to Govt. This surplus payout is driven by robust gross dollar sales, higher foreign exchange gains, and steady increases in interest income. Due to RBI dividend payout, fiscal deficit could decline by 30 bps to 4.2%.

Softening of fwd premia and yield drop are other important market developments last week.

Q4 Corporate results season has almost drawn to a close. Nifty 50 Companies revenue climbed 6.04% and net profit grew by 6.5% IN Q4.

USDINR is expected to trade in the 85-85.95 range next week.

Hedging advise: Exports can be hedged on rally to 85.95. Imports be covered at 85.

Global developments:  Dollar surge after US Court ruling on tariffs proved short lived as traders are skeptical as administration is expected to find new procedures to continue with their policy. Only, the legal complexity has increased and further uncertainty has been fuelled further. US President accused China of not complying with temporary tariff deal and threatened to escalate if China does not comply. He also announced 50% tariff on steel and aluminum imports.

US tax bill and tariff path continued to weigh down on USD as worries mounted over long term debt implications. US President also backtracked on 50% tariff on EU imports. It has been pushed to July 9 th.

US President Trump met with Fed Chair Powell for the first time in his second term, reiterating his view that the Fed is making a mistake by not lowering interest rates. Powell stressed that policy decisions would be dependent on the economic data. 

Fed member warned that major shifts in US trade policies are clouding the outlook for monetary policy, making it difficult for the Fed to move on interest rates before September.

ECB Governing Council members reinforced expectations for a rate cut in June, as inflation continues to moderate across the Eurozone.

Focus now is on US employment data and Global mfrg and services data.

Currency technical levels: USDINR: 85.15/85 (Supports), 85.70/85.95 (resistance),

EURINR:96.10(Support), 97.50/98.50 (Resistance)

GBPINR: Supports: 114.20( supports), Resistance:116.50(Resistance).

JPYINR: Resistance:61 Supports: 58.40 (support).

Hedging advise: USDINR receivables be hedged on rally to 85.95 and payables be hedged at 85.