FX – WEEKLY UPDATE :

Weekly SYNOPSIS: 01/08/2025

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Currency Map:

Currency Pairs	WEEK CLOSE	PRIOR WEEK CLOSE	% change
USD/INR	87.51	86.53	1.13
EUR/INR	99.88	101.73	-1.81
GBP/INR	115.34	116.79	-1.24
JPY/INR	58.04	58.87	-1.4

Brent Crude closed at USD 69.50 VS previous week close of USD 68.50. Gold closed at USD 3362. Nifty closed at 24565 vs prior week close of 24837. 10 Year G-SEC Yield is now at 6.37%.

Major developments: USDINR traded in the 86.41-87.75 range last week, and Rupee declined 1 Rs against USD w/w. EUR declined 1.81% w/w and GBP declined 1.24% w/w against Rupee.

Indian benchmark Equity indices declined 1.08% w/w. 10 Year G-SEC Yield closed at 6.37%.

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

FX reserves stood at USD 698 bn, as on July 25 th. Reserves climbed US D 2.7 bn w/w.

In July, FII’S have sold 24723 Cr of Indian Equities and have sold Rs 1880  cr of debt.

Rupee declined due to multiple factors. FII selling, month end demand and USD index strength were added contributors to US imposition of 25% tariff. As India-US trade deal did not meet final timeline of Aug 1 st, US President imposed 25% tariff and warned of further penalties if India continues to buy Russian Oil. Indian Govt took a measured and calm approach, assuring industry and farmers of safeguarding their interests, while continuing to engage with US on trade talks.

RBI’S intervention at 87.70 and on hopes of moderating tariffs in coming months, helped Rupee to stabilise.

 

Indian PMI(mfrg) climbed to 59.1 in July from 58.4 in June. New orders increased at the fastest pace in nearly five years, buoyed by favourable market conditions and marketing efforts. That propelled output growth to a 15-month high. International demand continued to support overall sales although growth in export orders moderated from June’s more than 17-year high. GST collections climbed 7.5% to 1.96 lac cr in July.

Focus will be on RBI MPC meeting, which may cut rates by 25 bps.

Expect USDINR to trade in the 86.80-86.70/86.35 zone in coming weeks.

Hedging advise: Imports can be hedged at 86.80/86.35 and exports can be hedged at 87.50/87.75.

Global developments: USD declined sharply following disappointing July jobs data and a huge downward revision to May and June data. U.S. non-farm payrolls rose just 73k in July, well short of the expected 102k. Unusually large revisions made the picture worse—June’s job growth was slashed from 147k to a mere 14k. Unemployment rate edged up from 4.1% to 4.2% as expected, while average hourly earnings rose 0.3% month-over-month, keeping the annual pace at 3.9%. On the contrary to employment data, GDP and US Personal spending data were robust. US Q2 GDP blew past expectations with a 3.0% annualized growth rate.

Federal Open Market Committee held interest rates on Wednesday in a split decision that gave little indication of when borrowing costs might be lowered. Fed rate is now at 4.25% to 4.5%. Fed Chairman said that no decision has been made for Sept.

Two dissenting Fed members issued rare public statements today defending their dissenting votes in favor of a rate cut at this week’s FOMC meeting. Both argued that a more proactive approach was needed to support the economy amid slowing growth and labor market softening.

US core PCE index held at 2.8% yoy, above market expectations of 2.7% yoy. Headline PCE inflation also rose more than expected from 2.4% yoy to 2.6% yoy. 

US President signed tariff orders with tariffs ranging from 14% to 41%. European Union signed a framework agreement last Sunday, easing tariff concerns and boosting expectations for future energy demand. U.S.–EU agreement announced last Sunday sets a 15% tariff on most European exports to the United States, down from a threatened 30%. It includes a commitment by the EU to buy $750 billion worth of U.S. energy products over the coming years.

France and Germany raised apprehensions over the impact of EU-US trade deal.

Focus will be on US ISM (services) and BOE meeting.

Currency technical levels: USDINR: 86.90/86.70 (Supports), 87.75 (resistance),

EURINR:99.50(Support), 101.80/102.35 (Resistance)

GBPINR: Supports: 114.85 (supports), Resistance:117.30.

JPYINR: Resistance:59.20/59.90 Supports: 58 (support).