TODAY: Tuesday, 18^th February, 2025

USD/INR:

The Indian rupee is likely to face pressure on Tuesday due to heightened dollar demand spurred by the maturity of positions in the non-deliverable forwards (NDF) market, while a dip in regional peers and portfolio outflows may add to the headwinds.

The 1-month non-deliverable forward indicated that the rupee USDINR will open at 86.93-86.94 to the U.S. dollar, compared with 86.8775 in the previous session.

Bids to buy dollars at the daily reference rate are likely to be elevated due to the maturity of large positions in the NDF market, three traders said.

The cumulative size of the maturities is estimated to be around $4 billion, a Singapore-based trader at a bank said.

A decline in Asian currencies is also likely to weigh on the rupee with its peers down between 0.1% to 0.3%.

The dollar index was up 0.1% at 106.9, recovering slightly from its lowest level in about two months.

The rupee has weakened about 1.5% year-to-date and is among the worst performing regional currencies.

It declined to an all-time low of 87.95 last week and might have had to endure deeper losses had it not been for the Reserve Bank of India's stern interventions, which have blunted speculative bets against the currency.

Traders expect the central bank to continue stepping into the market to prevent excessive volatility.

MAJOR WORLD CURRENCIES:

USD:

The dollar index rose above 106.8 on Tuesday, reversing a three-day decline as Federal Reserve officials signaled that the central bank should refrain from rushing to resume interest rate cuts while it remains focused on curbing inflation.

Fed Governor Christopher Waller suggested a pause in rate cuts based on recent economic data, unless inflation behaves similarly to 2024.

Fed Governor Michelle Bowman also called for patience, urging the Fed to wait for more evidence that inflation is on track to reach the 2% target, while Philadelphia Fed President Patrick Harker advocated for holding rates steady amid a strong economy.

Traders are now awaiting the release of the latest FOMC minutes this week for further guidance on the rates outlook.

Meanwhile, the dollar faced pressure last week due to mixed US economic data and easing concerns about aggressive tariffs.

Treasury Secretary Scott Bessent added that they are now examining currency manipulation as part of its broader trade strategy.

GBP/USD:

GBP/USD breaks its five-day winning streak, trading around 1.2600 during Tuesday's Asian session. Traders are awaiting UK employment data set to be released later in the day. The Claimant Count Change for January is expected to rise to 10K new unemployment benefit claimants, up from the previous 0.7K. The ILO Unemployment Rate is also forecast to increase to 4.5% from 4.4%.

British Prime Minister Keir Starmer stated on Monday that any peace deal for Ukraine would require a "US backstop" to prevent Russia from attacking again, according to Reuters. Starmer emphasized that Ukraine's future is a crucial issue for Europe, and it is urgent for Europe to share the responsibility in addressing the situation.

The downside risk for the GBP/USD pair could be linked to the strengthening US Dollar as Treasury yields rise. The US Dollar Index (DXY), which tracks the USD against six major currencies, edges higher after losing ground in the previous three sessions, trading around 106.90. At the same time, 2-year and 10-year US Treasury yields stand at 4.27% and 4.51%, respectively.

Federal Reserve Governor Michelle Bowman remarked on Monday that rising asset prices may have slowed the Fed's progress on inflation. While she expects inflation to decline, she warned that upside risks persist and stressed the need for more certainty before considering rate cuts.

Meanwhile, Fed Governor Christopher Waller acknowledged on Monday that while inflation has improved, progress has been “excruciatingly” slow. Waller emphasized the importance of not letting policy uncertainty hinder data-driven decisions.

EUR/USD:

EUR/USD extends its losses for the second successive session, trading near 1.0460 during the Asian hours on Tuesday. This downside could be attributed to the improved US Dollar (USD) amid rising Treasury yields.he US Dollar Index (DXY), which tracks the US Dollar's performance against six major currencies, edges higher after registering losses in the previous three successive sessions and trades around 106.90, while yields on 2-year and 10-year US Treasury bonds stand at 4.27% and 4.51%, respectively, at the time of writing.

Federal Reserve Governor Michelle Bowman stated on Monday that rising asset prices may have slowed the Fed’s recent progress on inflation. While Bowman expects inflation to decline, she cautioned that upside risks remain and emphasized the need for more certainty before considering rate cuts.

Meanwhile, Fed Governor Christopher Waller acknowledged late Monday that while inflation has improved, progress has been “excruciatingly” slow. Waller stressed that the Fed must not allow policy uncertainty to hinder data-driven decision-making.

The Euro faces downward pressure as several European Central Bank (ECB) officials remain comfortable with the outlook for three more rate cuts this year, following a 25 basis point reduction to 2.75% last month.

However, the Euro could gain support if a ceasefire in Ukraine is reached and gas supplies resume. A JP Morgan note suggests that the EUR/USD pair could appreciate by up to 5% under such circumstances.

Reports indicate that US President Donald Trump and Russian President Vladimir Putin have agreed to initiate negotiations to end the conflict. Officials from the Trump administration are scheduled to meet with their Russian counterparts in Saudi Arabia on Tuesday to discuss a potential peace agreement.

Gold:

Gold price (XAU/USD) trades with a mild positive bias above the $2,900 mark during the Asian session on Tuesday, though it lacks bullish conviction and remains confined in a familiar range that has held over the past week or so. Investors remain worried that US President Donald Trump's threat of reciprocal tariffs would trigger a global trade war. This turns out to be a key factor that continues to underpin demand for the safe-haven bullion. 

Adding to this, expectations that the Federal Reserve (Fed) might cut interest rates further this year, bolstered by the unforeseen drop in US Retail Sales, offers support to the non-yielding Gold price. That said, a goodish bounce in the US Treasury bond yields and a modest US Dollar (USD) uptick hold back the XAU/USD bulls from placing fresh bets. Nevertheless, the uncertainty over Trump's trade policies should act as a tailwind for the commodity. 

USD/INR Cash/Tom/Spot Levels: (in Paisa)

(Updated as on 18^th February, 2025 @ 09.00am)

 Cash/Tom: 0.20/3.00               Cash/Spot: 0.30/4.50

 Tom/Spot:  0.10/1.50                Spot/Next: 0.30/4.50

Cash Date:   18.02.2025

Tom Date:     20.02.2025

Spot Date:     21.02.2025

Outlook for the day 18^th February, 2025:   Rupee expected to trade in range of 86.70/87.00.

MAJOR WORLD CURRENCIES: as on (17^th February, 2025)

Foreign Currencies

Updated: 17:30 hrs. (12:00 GMT) on 17^th February, 2025

Precious Metals

Updated: 17:30 hrs. (12:00 GMT) as on 17^th February, 2025

Stock Indices

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