Forex

The Indian rupee closed little changed on Thursday, supported by likely central bank intervention and inflows tied to an equity index rebalancing that helped counter pressure from a U.S. rate hike. Most Asian currencies weakened as the dollar strengthened, with the dollar index holding above 100. The Reserve Bank of India also absorbed surplus rupee liquidity via an open market debt sale.

The dollar was steady on Monday, while the yen held onto recent gains and hovered near a seven-month high as markets awaited this week’s policy meetings from the Federal Reserve and the Bank of Japan. Oil prices, pushed well above $100 a barrel by the six-month U.S.-Israeli war on Iran, have complicated the global interest-rate outlook, Reuters reported. After U.S. consumer prices accelerated in August, traders priced in an 86% chance of a Fed hike this week, with the possibility of another increase later in the year. The euro was at $1.159, sterling at $1.3524, and the dollar at 153.49 yen.

The dollar strengthened slightly against the euro and Swiss franc after U.S. consumer prices rose 0.4% in August, lifting expectations the Federal Reserve could raise interest rates next week. Gains were limited as escalating tensions in the Middle East kept oil above $100 per barrel and added to inflation concerns. The yen firmed on speculation the Bank of Japan may hike rates, underscoring persistent uncertainty around inflation and geopolitical risks.

The Canadian dollar fell to a nine-day low of 1.3862 per U.S. dollar, leaving it down 0.2% on the week. U.S. inflation data reinforced expectations the Federal Reserve will raise interest rates next week. Markets are pricing a 57% chance the Bank of Canada hikes at its Oct. 28 decision. A softer oil price also added pressure, with more than 70% of Canadian exports shipped to the United States.

The Indian rupee slipped 25 paise to 95.33 against the US dollar in early trade on Thursday after Brent crude moved above USD 100 a barrel, stoking worries over India’s import costs. India imports nearly 90 per cent of its crude, and every USD 10 rise in oil can add roughly USD 1215 billion to the annual import bill, putting pressure on the current account and the rupee. In the previous session, the rupee ended 34 paise lower at 95.08. Domestic equities edged up, while foreign investors were net sellers of shares.

The yen surged on Tuesday, marking its strongest rally in two years as expectations grew that the Bank of Japan could raise interest rates. Oil prices, meanwhile, moved close to $100 a barrel after attacks on energy facilities in the Gulf raised supply concerns. Copper hit record highs as the European Central Bank prepared to lift euro zone rates, adding to global market volatility and forcing investors to reassess strategies amid rising inflation and bond yields.

The Indian rupee closed essentially unchanged on Monday, with the central bank supporting the currency through dollar sales. Brent crude rose to $96.6 a barrel, and Goldman Sachs warned prices could reach $120 if attacks on shipping escalate, adding to pressure on India’s current account. After strong U.S. jobs data, markets priced about a 57% chance of a Federal Reserve rate hike this month, while the dollar index eased to 98.9 and Asian currencies were mixed.

The Bloomberg Dollar Spot Index fell 0.7% for the week, though losses narrowed after strong US payrolls data on Friday lifted the implied odds of a September Fed rate hike to about 60%. The yen outperformed, rising about 2.4% against the dollar for its best week since July. Gains were driven by expectations that the Bank of Japan may raise its benchmark rate by a quarter point this month and keep the door open to faster hikes thereafter.

Fed Governor Christopher Waller is set to speak, and he is expected to underscore that a rate hike remains likely ahead of the September 16 FOMC meeting unless incoming data turn unexpectedly dovish. Markets have shifted to a new baseline that the Fed will raise rates in September, keeping the dollar steady after earlier gains. USD/JPY is expected to stay elevated around 160-162 on the hawkish outlook, while the Bank of Canada is seen holding rates at 2.25% as core inflation remains well anchored.

The Malaysian ringgit opened weaker against the US dollar on Wednesday at 4.0380/0445. Analysts linked the move to Brent crude rising to US$95.46 a barrel, which has lifted inflation worries and pushed market pricing for a US Federal Reserve rate hike at the September meeting to 65%. The US dollar index (DXY) was up 0.25% at 99.677 points, adding pressure on the ringgit, according to Bernama.