TODAY: Monday, 24^th March, 2025

USD/INR:

The Indian rupee's direction this week will be determined by the continuation of dollar inflows and the degree to which the central bank permits the currency to strengthen, while bond yields are expected to decline further.

The rupee rallied 1.2% to 85.9725 per U.S. dollar last week, its best weekly performance in two years, on persistent inflows via foreign banks and the unwinding of short wagers on the currency.

Inflows related to inter-company borrowings and repatriation of corporate profits are usual in March, the last month of the financial year.

Traders will also keep a close eye on the dollar index and U.S. Treasury yields. The dollar index has been on a downtrend amid worries over a U.S. economic slowdown. The S&P flash U.S. services and manufacturing data due Monday will help investors gauge the health of the world's largest economy.

Meanwhile, the benchmark 10-year bond yield (IN067934G=CC) ended at 6.6249% on Friday, down 7 basis points for the week, posting its biggest decline in four months.

Traders expect the yield to trade in the range of 6.60%-6.65% this week.

Bond yields fell last week, as stronger-than-expected demand for state debt, a surprise announcement from the RBI for a third debt purchase auction for this month, dovish Federal Reserve and a jump in the rupee aided sentiment.

The RBI will buy bonds worth 500 billion rupees ($5.82 billion) on Tuesday. The central bank has already infused over 5.50 trillion rupees into the banking system through a combination of primary and secondary market bond purchases, FX swaps and early-April maturity repos.

Sentiment has remained favourable after local retail inflation eased to 3.61% in February - the lowest since July 2024 - from 4.26% in January.

Market participants have raised bets of yet another interest rate cut in April by the RBI. The authority had reduced rates by 25 basis points last month, which was its first cut in nearly five years.

ICICI Securities Primary Dealership said changes in India's growth inflation mix have led to a change in the view to 75-100 basis points of policy of easing.

"Assuming that the committee (Monetary Policy Committee) also firmly sees two more cuts with optionality of a third from hereon, there is a case to upgrade policy stance to convey that message to markets and also cement the change towards a new, easier liquidity regime."

MAJOR WORLD CURRENCIES:

USD:

The US dollar index remained firm above 104 on Monday as investors awaited further clarity on President Donald Trump’s trade policies ahead of the April 2 deadline for his reciprocal tariffs.

Trump suggested on Friday that there could be “flexibility” in the plan, while weekend reports indicated that the tariffs may be narrower in scope, potentially sparing some industries.

The dollar has faced pressure for much of the year, as tariffs are expected to weigh on US economic growth.

However, it rebounded last week after the Federal Reserve reaffirmed that it is in no rush to cut interest rates further, despite signaling two rate reductions later this year.

Against major currencies, the greenback strengthened against the aussie, yen, and yuan, while holding steady versus the euro, sterling, and kiwi.

GBP/USD:

The GBP/USD pair continues to show some resilience below the 1.2900 round-figure mark and attracts some dip-buyers during the Asian session on Monday. Spot prices currently trade around the 1.2930 region, up nearly 0.10% for the day, and for now, seems to have snapped a two-day losing streak to a one-and-half-week low touched on Friday. 

The US Dollar (USD) kicks off the new week on a weaker note and stalls a three-day-old recovery move from a multi-month low, which, in turn, is seen as a key factor acting as a tailwind for the GBP/USD pair. Despite the fact that the Federal Reserve (Fed) gave a bump higher to its inflation projection, investors seem convinced that a tariff-driven US economic slowdown might force the central bank to resume its rate-cutting cycle soon. This, along with a positive tone around the US equity futures, seems to undermine the safe-haven Greenback. 

The British Pound (GBP), on the other hand, draws support from the Bank of England's (BoE) relatively hawkish stance. In fact, the UK central bank warned against assumptions for cuts and also increased its forecast for a peak in inflation this year. This suggests that the BoE will lower borrowing costs more slowly than other central banks, including the Fed, which lends additional support to the GBP/USD pair. Moreover, the recent breakout above the 200-day Simple Moving Average (SMA) for the first time since November favors bullish traders. 

Moving ahead, traders now look forward to the release of flash PMIs from the UK and the US for some meaningful impetus. Apart from this, speeches from influential FOMC members would drive the USD demand, which, along with BoE Governor Andrew Bailey's comments, should produce short-term trading opportunities around the GBP/USD pair. Nevertheless, spot prices remain within the striking distance of the highest level since November touched last week and the fundamental backdrop supports prospects for additional gains.

EUR/USD:

EUR/USD pauses its three-day decline, trading around 1.0840 during Asian hours on Monday. The pair gains as concerns over a US economic slowdown, driven by trade policies under President Donald Trump, weigh on the US Dollar (USD). Investors are now focused on the preliminary March Purchasing Managers Index (PMI) data for the Eurozone, Germany, and the United States (US), set for release later in the day.

The EUR/USD pair also benefits from improved risk sentiment as the White House revises its tariff strategy before the April 2 implementation. According to the Wall Street Journal, the administration is expected to drop some industry-specific tariffs while imposing reciprocal tariffs on countries with strong trade ties to the US.

Additionally, geopolitical tensions ease following talks between Ukrainian and US officials in Riyadh on Sunday. Efforts to broker a ceasefire continue, with President Trump advocating for an end to the three-year war. Ukrainian Defense Minister Rustem Umerov discussed measures to safeguard energy and critical infrastructure, while US and Russian delegates are set for separate talks on Monday, according to Bloomberg.

However, the Euro (EUR) faces headwinds amid concerns that Trump’s reciprocal tariffs could significantly hinder the Eurozone’s economic growth. Last week, European Central Bank (ECB) President Christine Lagarde cautioned about downside risks stemming from the Trump-led trade dispute while downplaying fears of persistently high Eurozone inflation.

Adding to the uncertainty, ECB Vice President Luis de Guindos told The Sunday Times that President Trump’s policies are creating more economic instability than during the COVID-19 crisis. Similarly, Jose Luis Escriva stated on Bloomberg TV on Friday that inflation and economic growth forecasts face significant risks in both directions, making future interest rate decisions highly unpredictable.

Germany, one of the US's key trading partners, is expected to bear the brunt of Trump’s reciprocal tariffs. While the US currently imposes a 2.5% tariff on German car imports compared to the Eurozone’s 10% duty, Trump has threatened to introduce a 25% tariff on foreign automobiles. Germany’s Bundestag lower house of parliament has approved measures to expand borrowing limits, injecting billions of Euros into the economy, which may cushion against potential US tariff impacts.

Gold:

The Gold price (XAU/USD) extends the decline to around $3,025 during the early Asian session on Monday. The precious metal edges lower after reaching an all-time high on Thursday amid hopes for a Ukraine peace deal. However, potential rate cuts signaled by the Federal Reserve (Fed) and ongoing economic uncertainties might cap the upside for yellow metal. 

On Sunday, Ukrainian and US officials held talks in Riyadh, Saudi Arabia, resuming efforts to end three years of war as President Donald Trump pushes for a ceasefire. Ukrainian Defense Minister Rustem Umerov stated that the discussion over the weekend was “productive and focused.” 

Umerov highlighted key points, including proposals to protect energy facilities and critical infrastructure. US and Russian delegates are expected to hold separate talks on Monday. The optimistic developments surrounding Russia and Ukraine's ceasefire dampen the gold demand, a traditional safe-haven currency. 

On the other hand, the prospect of further rate reductions might help limit the non-yielding Gold’s losses. The Fed has held interest rates steady at meetings in January and March due to waiting for further progress on disinflation at the time. The US central bank sees a high degree of uncertainty in the economic outlook. Policymakers projected imply an average of two cuts in 2025, as updated last week.  

Fed Chair Jerome Powell said last week that US President Donald Trump's policies, including import tariffs, may have slowed US economic growth and increased inflation. "Gold is not even acting as a safe-haven asset yet to retail investors because technically we're not in a recession. We are seeing the slowdown in the economy and that could very well create further uncertainty and more desire for safe-haven assets,” said Alex Ebkarian, chief operating officer at Allegiance Gold.

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

(Updated as on 24^th March, 2025 @ 09.00am)

 Cash/Tom: - 0.10/1.25   Cash/Spot: - 0.20/2.50

 Tom/Spot:  - 0.10/1.25    Spot/Next: - 0.10/1.25

Cash Date:   24.03.2025

Tom Date:     25.03.2025

Spot Date:     26.03.2025

Outlook for the day 24^th March ,2025: Rupee expected to trade in range of 85.70/86.20.

MAJOR WORLD CURRENCIES: as on (21^st March, 2025)

Foreign Currencies

Updated: 17:30 hrs. (12:00 GMT) on 21^st March , 2025

Precious Metals

Updated: 17:30 hrs. (12:00 GMT) as on 21^st March , 2025

Stock Indices

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