Indian currency concludes turbulent week with a subdued tone, hinting at potential minor depreciation in value
The British pound led losses among G10 currencies this week, while the Indian rupee saw a mixed performance. After an initial uptick earlier in the week, the rupee experienced a retreat, settling in the 87.50-88.50 range in the near-term.
The Indian rupee managed to gain 0.2% on the week, though India's benchmark equity indexes, the BSE Sensex and Nifty 50, were lower on the day but ended the week higher by about 0.8% each.
The retreat in the Indian rupee occurred despite a U.S. rate cut, as concerns over U.S. tariffs impacting trade and foreign portfolio flows persisted. The currency closed at 88.09 against the U.S. dollar on Friday, having touched a high of 87.72 before retreating to near all-time lows.
The dollar index was last up 0.2%, reflecting a broader trend of Asian currencies being weaker. The yield on the 10-year U.S. Treasury was up 6 basis points on the week and last at 4.12%.
The U.S. Federal Reserve (Fed) published a forecast last week, indicating that the bank is navigating a tension between economic slowdown, persistent inflation, and political challenges, which influences the dollar's development.
Meanwhile, MUFG predicts a downside for the U.S. dollar's medium-term outlook, citing concerns about U.S. labor market weakness and potential for deeper policy easing.
The rate expectations-sensitive 2-year U.S. Treasury yield nudged 3.577% higher, reflecting the Fed's interest rate decision earlier this week.
Recent talks between New Delhi and Washington have spurred optimism on an eventual trade deal, which could potentially boost the Indian rupee's performance in the near future.
Despite these developments, the bias is still tilted towards modest depreciation for the Indian rupee, as uncertainty around global trade and monetary policy continues to impact currency markets.
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