FX – WEEKY UPDATE :

Weekly SYNOPSIS: 05/09/2025

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Currency Map:

Currency Pairs	WEEK CLOSE	PRIOR WEEK CLOSE	% change
USD/INR	88.25	88.18	0.08
EUR/INR	103.08	102.47	0.60
GBP/INR	118.92	118.57	0.30
JPY/INR	59.59	59.76	-0.28

Brent Crude closed at USD 65.50 VS previous week close of USD 67.50. Gold closed at USD 3586. Nifty closed at 24741 vs prior week close of 24426. 10 Year G-SEC Yield is now at 6.46%.

Major developments: USDINR traded in the 87.86-88.35 range last week, and Rupee  declined 7 ps against USD w/w. EUR climbed 0.60% w/w and GBP climbed 0.30% w/w against Rupee.

Indian benchmark Equity indices climbed 1.28% w/w. 10 Year G-SEC Yield closed at 6.46%.

1-year fwd premia is at 2.20% p.a. G-sec yields softened.

FX reserves stood at USD 694 bn, as on Aug 29 th. Reserves increased by US D 3.5 bn w/w.

In Sept, FII’S have sold 3274 Cr of Indian Equities and have sold Rs 69  cr of debt.

Indian Rupee hit 88.33 for the second time. Continued FII selling is the major contributor in Rupee weakness, which has already been impacted negatively by US tariff of 50%.

GST council took important decision to cut rates, benefitting consumers. As promised by PM, FM announced that 99% of Goods will either be at Zero or 5%. Insurance premiums will have no GST. GST reduction, lower interest rates and raise in IT Ceiling limits should boost consumption and growth.

Indian Aug PMI(mfrg) climbed to 59.3 from 59.1 in July. This is the fastest pace of growth in 17 years. GST collections rose 6.5% y/y to Rs 1.86 lac Cr.

 

Though there is no let off in tariff rants by US officials, there seems to be softening of tone by US President. India is moving fast to conclude free trade agreement with EU. EFTA deal has been signed already. UK deal has been done. If US trade relations improve, Rupee could stabilise and gain to 87 level.

Focus will be on CPI data.

Hedging advise: Export hedging can be done from now till 88.60.

Global developments: Adverse US Court ruling on Trump tariffs, continued pressure on Fed jeopardizing Fed’s independence and weak jobs data were the major events in the just concluded week. Global bonds came under pressure on worries over fiscal incoherence in major economies. On Friday, markets seemed to cheer weak jobs data as it could lead to Sept rate cuts.

August’s payroll report confirmed that the labor market is softening quite quickly. Job growth was well below expectations in August, with just 22k new jobs added, and has averaged only 29k over the past three months. Unemployment rate ticked up from 4.2% to 4.3%. Wage growth remained steady, with average hourly earnings rising 0.3% mom and up 3.7% over the past year.

USD slumped and 10 Year yield declined to 4.1%. Traders are unanimous that 25 bps cut will be delivered in Sept with rising hope for 50 bps cut.

ECB President issued a stark warning, saying it would be “very worrying” if U.S. President Donald Trump succeeded in his efforts to exert control over the Fed and added that Friday’s U.S. appeals court ruling, which declared most of Trump’s tariffs illegal, created a “further layer of uncertainty” for the global economic outlook. The combination of policy unpredictability in Washington and structural risks elsewhere leaves investors wary at a time when global growth is already under strain from weak trade flows and tariff disputes.

Focus is now on US inflation data.

Currency technical levels: USDINR: 87.80/87.50 (Supports), 88.35/88.60 (resistance),

EURINR:101.10(Support), 104.20/105 (Resistance)

GBPINR: Supports: 116.90 (supports), Resistance:120.70

JPYINR: Resistance:60.25/60.80 Supports: 58.75 (support).