The Indian government and central bank are struggling to control a weak Rupee by making several interventions to prevent its continued depreciation to record lows.
- The biggest event each month in the Forex market in recent years has usually been the release of US CPI (inflation) data, and this is happening today. Anualised inflation currently stands at 3.3% and is widely expected to rise to 3.7%. Any deviation from that in the result, especially if it is a large deviation, will likely affect the values of the US Dollar and US stock markets.
- The Indian Rupee is getting a lot of market focus, even though it is an exotic currency, as it trades very near to its all-time low against the US Dollar. The USD/INR currency pair is close enough to a bullish breakout which could happen at any time. The weakness is caused by the recent crude oil price shock and India's huge structural demand for US Dollar. However, the Reserve Bank of India and the Indian government are working hard to try to prevent further, technically significant depreciation by taking the following measures (among others) outlined below. It is hard for a central bank to prop up their currency, so you might want to trade either with or against them depending upon your view.
- Selling large amounts of dollars from FX reserves in spot, forwards and NDF markets to slow the rupee’s decline.
- Using state‑run banks to sell dollars around key levels (e.g., near 94–95) to cap intraday spikes in USD/INR.
- Capping banks’ open FX positions (around 100m USD) and tightening rules on rupee derivatives and NDFs to curb speculative attacks.
- Considering or preparing government steps to restrict “non‑essential” imports (especially gold and some consumer goods) and encourage exports to reduce FX outflows.
- The USD/JPY currency pair reached as high as ¥157.75 before the Japanese Ministry of Finance sent it quickly lower by about 100 pips just by issuing a verbal warning that imminent intervention was possible. However, the price has clawed back about 75% of its earlier loss already. Warnings of or actual FX intervention by the Japanese financial establishment is going to be a real factor in the Yen for a while.
- Equities have mostly done well over the past 24 hours, with the KOSPI Composite Index trading higher to make a strong new high today, and the US S&P 500 Index and the NASDAQ 100 Index also making new records during yesterday's market session. I am long of all three indices which have been looking very bullish and trading in blue sky.
- President Trump is still threatening Iran and publicly calling its leaders deceitful, but he is also still talking about a possible deal. Trump is going to meet President Xi on Thursday, so if he is going back to war, that will almost certainly not happen until next weekend. I expect with a weak degree of confidence that President Trump will strike Iran over the coming weekend after he leaves China. This will likely send energies like Crude Oil and Gasoline higher, but it might not do very much to bullish, strong stock markets - although that will depend what Trump will do militarily in Iran.
- The more bellicose rhetoric has pushed Crude Oil and Gasoline a little higher, but not by anything dramatic. Both are still well off their recent highs. I am sitting on the sidelines with these.
- The prediction site Polymarket now sees a peace deal between the USA and Iran unlikely to happen until the second half of 2026.
- In the Forex market, the strongest major currency since the Tokyo open was the Japanese Yen, while the Australian Dollar has been the weakest. The US Dollar has firmed slightly.
- As well as the US CPI (inflation) data which will be released today, the nomination vote for Kevin Warsh as the new Fed Chair will also be held.