The Brazilian real strengthened past 5.7 per USD, nearing its highest level since November 2024 of 5.65 seen on March 19th, as investors digested fresh Copom minutes. Minutes underscored the persistent challenge of unanchored inflation expectations and signaled further tightening on the horizon, with a 0.50 percentage point hike expected in May followed by a 0.25 point increase in June. This anticipated monetary adjustment, designed to reinforce clear transmission channels, enhances the yield appeal of Brazilian assets and supports the real. Additionally, consumer confidence in Brazil rose by 0.7 points to 84.3 in March, breaking a three-month decline that had pushed the index to its lowest level in over two years. Moreover, the potential easing of additional U.S. tariffs is providing relief by improving external trade conditions and reducing pressure on Brazilian exporters.

Brazilian Real Strengthens on Tightening Outlook

The dollar index edged lower to 104.1 on Tuesday but remained near a three-week high as investors weighed economic data, Fed commentary, and potential tariff impacts. The latest CB consumer confidence survey showed morale fell sharply for the fourth straight month in March, with future expectations hitting a 12-year low and financial outlooks at their weakest since July 2022. Meanwhile, Monday’s data indicated U.S. business activity strengthened in March, as a sharp rebound in services offset renewed weakness in manufacturing. On monetary policy, Fed Governor Kugler acknowledged that policy remains restrictive but warned that progress toward the 2% inflation target has slowed, calling the recent rise in goods inflation "unhelpful." Elsewhere, recent remarks from President Trump raised hopes for a more targeted tariff strategy, easing concerns about widespread economic disruption.

Dollar Slightly Down as Investors Digest Economic Data and Fed Signals

The Russian ruble traded around 84.5 per USD, pausing after a rally earlier this year that pushed it to a June 2023 high of 81.7. The currency's gains were fueled by hopes of easing geopolitical tensions amid ongoing ceasefire negotiations between Russia and the United States. Ukraine has already agreed to a 30-day ceasefire, but President Putin has resisted accepting all US proposals, insisting that any agreement must prevent Ukraine from rearming. So far this year, the ruble has strengthened about 25% against the USD, also supported by higher interest rates. In March, the Central Bank of Russia kept its policy rate steady at 21%, as expected, while striking a more optimistic tone on disinflation.

Ruble Rally Pauses

The New Zealand dollar rose to around $0.574 on Tuesday after five consecutive declines, as optimism over possible US tariff exemptions provided some relief to the export-driven currency. However, investor caution persists over upcoming duties on autos, pharmaceuticals, and other industries planned by President Trump and their potential impact on global growth. Domestically, despite last week’s strong GDP data, markets still expect further monetary easing from the RBNZ. In their February meeting, policymakers signaled two 25bps cuts in April and May, with a possible third later in the year. Meanwhile, the Kiwi could find support from anticipated Chinese stimulus aimed at boosting consumption, potentially benefiting New Zealand exports given China’s role as a key trade partner.

New Zealand Dollar Rises

The New Zealand dollar extended its decline to around $0.572 on Tuesday, hovering near a one-week low, as prospects of looser RBNZ policy and looming US reciprocal tariffs weighed on the export-driven currency. President Trump announced duties on autos, pharmaceuticals, and other industries while hinting that some nations may receive exemptions or reductions on April 2. At home, despite last week’s strong GDP data, markets still anticipate further easing from the central bank. Policymakers signaled during their February meeting two 25bps cuts in April and May, with a potential third later in the year. Meanwhile, the Kiwi could find relief from expected Chinese stimulus designed to spur consumption, which may boost New Zealand exports given China’s role as a key trade partner.

Kiwi Dollar Extends Bearish Run

The offshore yuan extended its decline to around 7.27 per dollar, hovering near two-week lows, pressured by growing concerns over the effectiveness of China’s stimulus measures in offsetting new US tariffs. China has set a 5% GDP growth target, raised its deficit to a three-decade high, and unveiled plans to boost consumption and domestic demand, yet the economy continues to grapple with sluggish growth. However, markets found some relief after Trump signaled a more targeted approach to tariffs. On the monetary policy front, the People's Bank of China announced it would downplay the medium-term lending facility rate in favor of the seven-day reverse repo rate, adopting a new bidding system for MLF loans. While aiming to maintain liquidity, this shift has raised uncertainty over borrowing costs. The central bank also plans to issue CNY 450 billion in one-year MLF loans and signaled potential rate cuts, keeping the yuan under pressure.

Offshore Yuan Hovers at 2-Week Low

The Japanese yen remained weak at around 150.7 per dollar on Tuesday, hovering near a three-week low as the dollar strengthened on solid US economic data and expectations that President Donald Trump may take a more selective approach to tariffs. Meanwhile, Trump’s pledge on Monday to impose levies on automobiles, pharmaceuticals, and other industries raised concerns about potential risks to key Japanese exports. Domestically, minutes from the Bank of Japan’s January meeting showed that policymakers remain open to additional interest rate hikes, depending on wage growth and inflation trends. One member suggested the policy rate could reach 1% in the second half of fiscal 2025. Last week, the BOJ held its policy rate steady at 0.5%, with board members maintaining a cautious stance as they assess global economic risks, particularly the potential fallout from higher US tariffs.

Japanese Yen Holds Losses Against Strong Dollar

The Australian dollar remained steady at $0.628 on Tuesday, remaining sideways so far this week as investors awaited the government’s general budget announcement, which is expected to reveal a deficit after two years of surpluses. Meanwhile, the Reserve Bank of Australia is set to decide on monetary policy next week, with markets widely anticipating no changes. Traders currently see a two-thirds chance of another rate cut in May, following the RBA’s first reduction in over four years last month. However, the central bank has cautioned that further easing is not guaranteed. Globally, market sentiment was influenced by uncertainty over US trade policy. While optimism grew that President Donald Trump may take a more selective approach to tariffs ahead of the April 2 deadline, his pledge to impose levies on automobiles, pharmaceuticals, and other industries on Monday added to the uncertainty.

Australian Dollar Holds Steady Ahead of Budget

The dollar index steadied around 104.3 on Tuesday, its highest level in three weeks amid strong economic data, while traders weighed the potential impact of upcoming tariffs. Data on Monday showed US business activity picked up in March, with a sharp rebound in the service sector offsetting a renewed decline in manufacturing output. However, business expectations for the year ahead dropped to their second-lowest level since October 2022, weighed down by concerns over demand, tariffs, and broader policy shifts under the new administration. Recent remarks from President Donald Trump fueled hopes of a more targeted approach to tariffs, easing fears of widespread economic disruption. However, his pledge to impose levies on automobiles, pharmaceuticals, and other industries added to market uncertainty. The dollar held gains against most major currencies, strengthening the most against the yen.

Dollar Hovers at 3-Week High

The Mexican peso strengthened toward 20.1 per USD, nearing a four-month high reached on March 18th, amid growing optimism that the US tariffs set for April 2nd will be more targeted and less severe than initially feared. Reports indicate that President Donald Trump's forthcoming tariffs will be narrowly tailored, alleviating concerns over the risk of a recession as warned by the Organization for Economic Cooperation and Development, which projected a contraction of 1.3% in 2025 and 0.6% in 2026 if sustained tariffs persist. Additionally, an easing of inflation to 3.67% in mid-March, coming in below forecasts, suggests that domestic price pressures are being well managed, further supporting confidence in the peso.

Mexican Peso Lifted by Tariff Optimism

The US dollar index rose above the 104.3 mark, reaching its highest level since March 4, as investors assessed the latest PMI data and awaited further clarity on President Trump’s trade policies ahead of the April 2 deadline for his reciprocal tariffs. The latest survey revealed that US business activity picked up in March, with a significant rebound in the service sector offsetting a renewed decline in manufacturing output. However, business expectations for the year ahead fell to their second-lowest level since October 2022, driven by concerns over demand, tariffs, and broader policy changes from the new administration. Meanwhile, Trump suggested Friday that there could be “flexibility” in the tariff plan, with weekend reports indicating the measures might be narrower in scope, potentially exempting certain industries. On the monetary policy front, the US Fed reiterated that it is in no rush to further cut interest rates, despite signaling two rate reductions later this year.

Dollar Nears 3-Week High

The British pound rose to $1.295, moving closer to an over four-month high of $1.3 hit last week after positive PMI figures indicated signs of an economic recovery. The latest PMI data showed significant growth in the services sector, driven by demand in financial and consumer services. As a result, traders now see a 60% chance of a quarter-point rate cut in May, down from earlier expectations of a more aggressive pace. Also, HSBC predicts a slower rate-cutting trajectory, with the BoE’s key rate likely to reach 3% by Q3 2026. In the US, the Federal Reserve signaled two rate cuts later this year. Meanwhile, attention now is on Chancellor Rachel Reeves' upcoming Spring Statement on Wednesday.

Sterling Edges Up on Monday

The South African rand was firmer around 18.1 per USD, helped by a softer dollar as traders awaited clarity on US trade tariffs and its global economic impact. Locally, the South African Reserve Bank (SARB) opted to keep interest rates unchanged at its recent meeting on March 20, driven by continued concerns over inflation risks and economic uncertainty linked to both global trade and national budget issues.

South African Rand Strengthens

The euro held above the $1.08 mark, hovering just below the five-month high of $1.095 reached on March 18th, as investors assessed the latest PMI data and remarks from ECB officials. Recent surveys indicated that Eurozone private sector activity expanded at its fastest pace since August, though the growth fell short of market expectations, with a rebound in manufacturing output partially offset by a slowdown in the services sector. Meanwhile, ECB official Cipollone suggested that the case for a rate cut is strengthening, as inflation may be slowing faster than anticipated. His colleague Stournaras echoed this sentiment on Friday, stating that all signs point to a cut in April. Additionally, President Lagarde cautioned about weaker economic growth but downplayed inflation risks if the EU retaliated against US tariffs, signaling that the ECB would not counter with higher rates. ECB’s de Galhau also reinforced the view that the central bank has room to further ease borrowing costs.

Euro Little-Changed as Investors Assess PMI Data and ECB Rate Cut Signals

The Turkish lira extended its decline to record lows, trading above 37 per USD, as political turmoil in Turkey intensified. Istanbul’s mayor, Ekrem Imamoglu, one of the country’s most high-profile politicians and President Erdogan’s key rival, was formally arrested and sentenced to jail on corruption charges. His detention last week, along with the revocation of his university diploma, is expected to disqualify him from running against Erdogan in the upcoming elections, sparking widespread protests and a sharp sell-off in Turkish assets. Imamoglu had been poised to secure the presidential nomination for the Republican People’s Party (CHP), the main opposition group. In an attempt to stabilize markets, the central bank of Turkey raised the key overnight lending rate by 200 basis points to 46% during an emergency meeting last week and has engaged with the country’s top lenders in further efforts to contain the fallout.

Turkish Lira Continues to Fall

The New Zealand dollar extended its decline to around $0.573 on Monday, hovering at a one-week low, as concerns over the looming April 2 deadline for US reciprocal tariffs weighed on the export-reliant currency. However, President Trump suggested there could be "flexibility" in the tariff plans, and recent reports indicate the scope might be narrower than expected, potentially exempting some industries from the full impact. Domestically, last week's data confirmed the economy had exited recession, but expectations of further RBNZ rate cuts this year remained unchanged. At its last meeting, policymakers flagged two 25 bps cuts in April and May, with the possibility of a third later in the year. Meanwhile, the Kiwi could find support from anticipated Chinese stimulus aimed at boosting consumption, given China’s key role as New Zealand’s major trading partner.

Kiwi Dollar Remains Under Pressure

The offshore yuan inches lower around 7.26 per dollar, hitting its lowest level in two weeks, pressured by ongoing US dollar strength. The greenback's appreciation was driven by remarks from Fed Chair Powell, who reiterated that the central bank is in no rush to cut interest rates. Additionally, Trump’s April 2 deadline for reciprocal tariffs continued to weigh on sentiment. However, Trump hinted at 'flexibility' in tariff implementation, raising hopes for a more targeted approach. Adding pressure on the yuan, the People’s Bank of China scaled back support through its daily midpoint fixings, signaling its intent to curb sharp depreciation against the US dollar. On the monetary policy front, the PBOC kept key lending rates unchanged for a fifth month in March, with the one-year LPR at 3.1% and the five-year at 3.6%, both at historic lows. Still, the central bank remarked that it will lower interest rates and adjust the bank’s reserve requirement ratio at the appropriate time.

Offshore Yuan Hits 2-Week Low

The South Korean won fell to around 1,467 per dollar on Monday as market sentiment soured amid the unfolding political developments surrounding the court ruling on the president's impeachment. This came after Prime Minister Han Duck-soo was reinstated as acting leader, with South Korea's Constitutional Court ruling to restore his powers, marking another dramatic twist in the country's political landscape. The pressure on the won was further compounded by concerns over the looming threat of reciprocal tariffs from U.S. President Donald Trump, set to take effect on April 2. However, Trump hinted at potential “flexibility” in the tariff plans, while recent reports suggested that the scope could be more limited than initially anticipated, potentially exempting certain industries from the full impact.

South Korean Won Falls on Political Woes

The Japanese yen slipped toward 150 per dollar on Monday, extending losses from the previous session as disappointing business activity data countered a hawkish Bank of Japan outlook. In March, Japan’s private sector activity contracted for the first time in five months, with the manufacturing downturn extending to a ninth month and services activity also turning negative. Last week, the BOJ kept its policy rate steady at 0.5%, with board members maintaining a cautious stance, opting to assess the impact of global economic risks, particularly the potential fallout from higher US tariffs. However, the central bank is still expected to raise interest rates further this year amid persistent inflation pressures and rising wages. Externally, the yen came under pressure against the US dollar, as President Donald Trump’s April 2 deadline for reciprocal tariffs continued to weigh on sentiment.

Japanese Yen Weakens on Soft PMI Data

The Australian dollar climbed toward $0.63 on Monday, snapping a four-day losing streak, as upbeat private sector activity data boosted market sentiment. In March, manufacturing activity expanded at its fastest pace in 29 months, while services sector growth also accelerated, reinforcing the Reserve Bank of Australia’s cautious stance on further interest rate cuts. Last week, RBA Assistant Governor Sarah Hunter noted that February’s rate cut was aimed at easing restrictive policy but emphasized that the central bank remains more cautious than markets regarding additional reductions. Rate cut expectations remain split, with some analysts forecasting a move as early as May, while others anticipate it in July or August. Externally, the Aussie also found support from expectations of increased Chinese stimulus and speculation that US President Donald Trump’s reciprocal tariffs may be less aggressive than initially feared.

Australian Dollar Rises on Strong PMI Data

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 dollar held steady versus the euro, sterling, and kiwi, while strengthening against the yen and yuan. However, the greenback weakened against the Australian dollar.

Dollar Steady as Markets Weigh Trump Tariffs

The Russian ruble weakened to 85 per USD from the near two-year high of 81.7 touched on March 18th as investors reconsidered the feasability of the US enabling Russia in returning to global financial markets. President Putin refrained from agreeing to all concessions suggested by the US in a ceasefire deal after a call with US President Trump, limiting previous hopes that a deal could introduce peace with Ukraine. Consequently, investors trimmed their previous rush onto Russian securities on hopes that the US would reintroduce Russian assets to global financial markets amid their signals of restoring economic ties with Moscow. Additionally, the ruble was also pressured by caution that the Kremlin may continue to relax capital controls to weaken the currency, as the decline in energy prices magnify the scarcity of budget revenues that come with a stronger ruble. On the policy front, the CBR held its policy rate at 21%, as expected, and stuck a more optimistic tone on disinflation.

Russian Ruble Pulls Back from Rally

The offshore yuan depreciated past 7.25 per dollar on Friday, hitting its lowest level in over a week, mainly due to a strengthening US dollar. The greenback's appreciation was buoyed by remarks from Fed Chair Powell, who indicated that the central bank is in no rush to cut interest rates. Adding further pressure on the yuan, the People's Bank of China scaled back its support for the currency through its daily midpoint fixings, signaling its intention to curb any sharp or rapid depreciation against the US dollar. On the monetary policy front, the PBOC kept its key lending rates unchanged for the fifth consecutive month in March 2025, in line with market expectations. The one-year loan prime rate remained at 3.1%, while the five-year loan prime rate held steady at 3.6%. Both rates are at historic lows, following cuts in October and July of 2024. Still, the PBOC remarked that it will lower interest rates and adjust the bank’s reserve requirement ratio at the appropriate time.

Offshore Yuan Falls Amid Dollar Strength

The South Korean won continued its downward trend toward 1,470 per dollar, extending losses for the fourth straight session, pressured by rising domestic economic concerns and global trade uncertainties. Markets braced for the April 2 deadline for Trump's reciprocal tariffs on key trading partners, intensifying trade war concerns. A stronger dollar also added pressure after the Federal Reserve signaled no rush to cut interest rates further. Domestically, escalating political turmoil weighed on sentiment following the Democratic Party’s move to impeach acting President Choi Sang-Mok. Additionally, the Bank of Korea’s latest meeting minutes highlighted concerns about a potential economic slowdown and recently cautioned over market volatility due to US policy uncertainty. Meanwhile, the Acting President emphasized 24-hour monitoring to protect South Korea’s credit rating amid global shifts and potential US tariffs.

South Korean Won Slips for 4th Session

The New Zealand dollar held its recent decline to around $0.575 on Friday amid risk-off sentiment due to lingering trade war concerns. Investor caution persisted as U.S. President Donald Trump remained poised to implement reciprocal tariff against key trading partners on April 2. Further weighing on the Kiwi was a stronger U.S. dollar, which strengthened after the Federal Reserve indicated it was in no rush to cut interest rates further. Domestically, the currency failed to gain support from data showing New Zealand’s economy had climbed out of a recession, given significant pockets of weakness. Expectations for policy easing remain firm, with markets pricing in around 60bps of rate cuts—equivalent to two or three reductions—by year-end. Despite these headwinds, the New Zealand dollar is still heading for a modest weekly gain.

New Zealand Dollar Holds Decline

The Australian dollar weakened past $0.63 on Friday, sliding for the fourth straight session as caution dominated sentiment amid rising global economic and trade concerns. Markets braced for the April 2 deadline of US President Donald Trump’s reciprocal tariffs on countries that have imposed levies on US goods, intensifying trade war fears. Adding to the pressure, uncertainty surrounding the timing and scale of Beijing’s latest stimulus plan weighed on the Aussie, which is often used as a liquid proxy for the Chinese yuan due to Australia’s strong trade ties with China. Domestically, RBA Assistant Governor Sarah Hunter stated this week that February’s rate cut was intended to ease restrictive policy. However, she emphasized that the central bank remains more cautious than markets regarding further rate reductions. Expectations for the next RBA rate cut remain divided, with some analysts predicting a move as early as May, while others anticipate it in July or August.

Australian Dollar Falls on Risk Aversion

The Japanese yen slipped to around 149 per dollar on Friday, snapping a two-day advance as investors reacted to the latest inflation figures. Japan’s core inflation rate slowed to 3% in February from 3.2% in January but still exceeded forecasts of 2.9%. This marked the second consecutive month that inflation surpassed expectations, highlighting persistent price pressures and reinforcing the case for further interest rate hikes. Earlier this week, the Bank of Japan kept its policy rate steady at 0.5%, as widely anticipated. Policymakers maintained a cautious stance, opting to assess the impact of global economic risks, particularly higher US tariffs, on Japan’s economy. The BOJ also reiterated its commitment to closely monitoring foreign exchange markets and their influence on economic conditions and prices. Externally, the yen faced pressure from a strengthening dollar as concerns over global growth and trade tensions weighed on other major currencies, keeping investors cautious.

Japanese Yen Weakens After Inflation Data

The US dollar index held its recent advance to around 103.8 on Friday as investors continued to assess the Federal Reserve's monetary policy stance. On Wednesday, the Fed kept policy unchanged but signaled two interest rate cuts this year. The central bank also highlighted rising risks to growth, employment, and inflation in its latest economic projections. Meanwhile, Fed Chair Jerome Powell downplayed concerns over the inflationary impact of President Donald Trump’s tariffs, calling them “transitory,” but reiterated that the central bank is in no rush to cut rates further. Traders are also bracing for the April 2 deadline of Trump’s reciprocal tariffs on countries that have imposed levies on US goods. Moreover, the dollar strengthened as concerns over global growth and trade tensions weighed on other major currencies, keeping investors cautious.

Dollar Holds Gains as Markets Weigh Fed Outlook

The Canadian dollar strengthened past 1.43 per USD, retreating from a three-week high of 1.43 seen March 17th, due to escalating trade tensions, monetary policy divergence, and a dimming economic outlook. President Trump’s tariff threats on Canadian imports, alongside existing U.S. duties on steel and aluminum, have weakened investor sentiment, while the Bank of Canada’s recent rate cut to 2.75% has widened the interest rate gap with the Fed, driving capital outflows. The OECD downgraded Canada’s growth forecast to 0.7% for 2025 and 2026, reinforcing bearish sentiment as inflation rose to 2.6% in February, largely driven by cost-push factors from tariffs rather than economic strength. Meanwhile, futures and options markets indicate growing bets against the loonie, reflecting persistent downside risks.

Loonie Under Pressure Amid Tariff Uncertainty

The Mexican peso weakened to over 20.2 per USD, sliding from a four-month high reached on March 18th, as the US dollar rebounded, while looming tariff threats that cast a shadow on Mexico's growth prospects. The Organization for Economic Cooperation and Development warned that sustained US tariffs on Mexican products could trigger a recession, projecting a contraction of 1.3% in 2025 and 0.6% in 2026 if duties remain unchanged. Persistent trade uncertainties—exacerbated by President Trump’s protectionist policies—are unsettling investors ahead of critical domestic economic data, including Mexico’s economic activity index and mid-month inflation reports, while the market anxiously awaits the next policy move from the Bank of Mexico. Moreover, with the US Federal Reserve signaling further cuts amid rising inflation and a more fragile growth outlook, the peso’s demand outlook remains constrained by its close ties to the US economy.

Peso Under Pressure Amid Tariff Fears and Fed Cues

The Brazilian real weakened past 5.6 per USD in March, easing from its highest level since November 2024, as markets react to the Central Bank’s hawkish stance and its forward guidance, which now signal further interest rate hikes beyond the recent 100 basis point increase to 14.25%—a move intended to anchor inflation but one that has raised concerns about dampening economic growth. Investors are wary that the anticipated 50 basis point hikes in May and June, potentially pushing the terminal Selic rate to 15.25%, will tighten credit conditions, restrict productive investments, and shrink domestic industry. This expectation of a prolonged tightening cycle, coupled with rising inflation expectations (projected at 5.7% for 2025 and 4.5% for 2026) and global trade uncertainties—particularly over U.S. policy—has eroded risk appetite, leading to capital outflows and placing downward pressure on the Brazilian currency.

Brazilian Real Eases After BCB

The dollar index rose to 104 on Thursday, gaining traction after falling to a five-month low of 103.2 this week despite the plunge in Treasury yields, amid dovish developments for currencies in the DXY. The SNB cut its key rate and signaled caution on not letting the franc strengthen due to safety demand, while the BoE and the Riksbank held rates and noted growth risks. This was after the Federal Reserve held its rates unchanged, as expected. Still, the FOMC downwardly revised projections on growth and upwardly revised projections on unemployment, while Chairman Powell noted that the impact of tariffs on inflation is expected to be transitory. In the meantime, the supply of dollars are also set to increase as the Federal Reserve slowed its balance sheet runoff by $20 billion monthly, and signaled that the slower runoff is expected to remain even if the Treasury normalizes its account after debt ceiling concerns are resolved.

US Dollar Index Rebounds

The British pound traded just below $1.30, retreating from a recent four-month high, after the Bank of England held its benchmark interest rate at 4.5% as expected and expressed concerns about both global and domestic economic uncertainties. Despite notable progress on disinflation in recent months, international trade policy uncertainty has escalated following the US announcement of tariffs, which prompted responses from some governments. Additionally, economic data continued to show signs of growth weakness, as Prime Minister Keir Starmer faces challenges in restoring confidence among consumers and businesses. Meanwhile, investors processed fresh unemployment data, with the jobless rate holding steady at 4.4%, and wage growth slowing slightly to 5.8% including bonuses and 5.9% excluding bonuses, both in line with forecasts. In the U.S., the Federal Reserve left interest rates unchanged but indicated two cuts later this year.

Sterling Slightly Below $1.3 After BoE Decision

The Indian rupee strengthened past 86.4 per USD, extending its rebound from the record low of 88 on March 7th amid the pullback in the dollar and the decline in oil prices. Crude oil prices remained relatively close to its lowest in over three years, limiting the outlook of rupee outflows as India imports over 90% of the fuel it uses to power its economy. Still, the RBI is expected to continue its loosening cycle to aid growth. The Indian GDP grew by 6.5% in the current financial year from 8.2% in the prior period. The slowing growth was in line with the extended period of high interest rates and tight currency controls to prop up the rupee, drying liquidity in the Indian financial system and driving the central bank to lower rates and relax its floating peg on the currency. The RBI delivered its first rate cut in nearly five years in its last meeting, in line with market expectations.

Indian Rupee Extends Rebound from Record Low

The euro fell below $1.085, retreating from a near five-month high of $1.09547 touched on March 18th, after ECB President Lagarde warned of weaker growth but downplayed inflation risks if the EU retaliated against US tariffs. Speaking to European lawmakers on Thursday, she cautioned that a 25% US tariff on European imports could cut euro area growth by 0.3 percentage points in the first year, with a counter-tariff deepening the hit to 0.5 points. The sharpest impact would come in the first year, with lingering effects on output, though inflationary pressures would fade over time, signaling the ECB would not respond with higher rates. Traders have recently scaled back expectations for ECB cuts, now pricing in two reductions, likely in April and June. The US Federal Reserve, for its part, held rates steady and reaffirmed plans for two cuts this year.

Euro Slips as Lagarde Warns of Growth Risks from US Tariffs

The Swiss franc weakened past 0.88 per USD after reaching a four-month high of 0.876 on March 18th after the Swiss National Bank lowered its key policy rate to 0.25%, its lowest since September of 2022. Even though the move was largely expected and the central bank refrained from committing to a specific policy path, policymakers noted that lower borrowing costs are appropriate to ensure that monetary conditions match the low inflationary pressure. The move also prevents the franc from being overly strong as geopolitical risks, the stable inflation in Switzerland, and uncertain economic policy in the US raise demand for the currency should investors pivot to safety. The annual inflation rate in Switzerland fell to 0.3% per the latest data, it's lowest in nearly four years. In the meantime, Saron futures showed that the market does not currently price more cuts in the cycle.

Swiss France Pulls Back from 4-Month High

The British pound fell to $1.296 on Thursday, retreating from a four-month high above $1.30, as traders adjusted their positions ahead of the Bank of England's interest rate decision and following the release of jobs data. Expectations for rate cuts this year increased slightly, with traders now pricing in 53 basis points. The unemployment rate remained steady at 4.4%, while wage growth showed a slight slowdown, with growth including bonuses at 5.8% and 5.9% excluding bonuses—both in line with forecasts. The Bank of England is likely to adopt a more cautious stance, amid concerns about the impact of Donald Trump’s trade policies and domestic inflationary pressures. While inflation in January came in at 3%, above expectations, the Bank is expected to keep the benchmark interest rate at 4.5% and maintain a careful approach to further rate cuts. Meanwhile, the U.S. Federal Reserve left interest rates unchanged but indicated two cuts later this year.

Sterling Falls Ahead BoE Decision

The New Zealand dollar fell to around $0.579 on Thursday, even after data showed the economy has emerged from recession. New Zealand's economy grew by 0.7% quarter-on-quarter in Q4, surpassing analysts' expectations of a 0.4% rise and the Reserve Bank’s forecast of 0.3%, following a revised 1.1% contraction in Q3. Meanwhile, annual GDP fell 1.1%, slightly better than the expected 1.4% decline. Despite the improvement, the RBNZ is unlikely to alter its planned rate cuts, as economic weakness persists and external headwinds, particularly the escalating trade tensions, continue to pose risks. In February, the central bank lowered its official cash rate by 50bps to 3.75% and signaled an additional two 25-basis-point cuts in April and May. Meanwhile, in the U.S., the Federal Reserve held interest rates steady on Wednesday and kept its forecast for two cuts amid high uncertainty about President Donald Trump’s tariffs.

New Zealand Dollar Weakens After GDP Data

The South Korean won held steady around 1,460 per dollar as investors assessed the US Federal Reserve’s decision to keep rates unchanged while signaling two rate cuts this year. Meanwhile, Fed Chair Powell downplayed the inflationary impact of Trump's tariffs, calling it likely short-lived or transitory. Domestically, the won remained under pressure as political uncertainty deepened, following the Constitutional Court's decision to withhold a ruling date on President Yoon Suk Yeol's impeachment. On the monetary policy front, the Bank of Korea’s latest meeting minutes signaled concerns over a potential economic slowdown, citing weak domestic spending and uncertainty over US trade policies. However, a board member suggested the easing cycle may end sooner than expected to ensure financial stability, citing rising household debt and property prices.

South Korean Won Holds Steady

The offshore yuan edged lower to around 7.23 per dollar as investors digested the latest monetary policy decision from the People’s Bank of China. The PBOC kept its key lending rates unchanged for the fifth consecutive month in March 2025, aligning with market expectations. The one-year loan prime rate, a benchmark for most corporate and household loans, stood at 3.1%, while the five-year loan prime rate, which guides property mortgages, remained unchanged at 3.6%. Both rates remain at historic lows following cuts in October and July of 2024. Still, the PBOC remarked that it will lower interest rates and adjust the bank’s reserve requirement ratio at the appropriate time. Meanwhile, Chinese policymakers recently unveiled a "special action plan" to boost consumer spending, though it lacked details on implementation.

Offshore Yuan Edges Lower, PBOC Holds Rates

The Japanese yen appreciated past 148.5 per dollar on Thursday, rising for the second straight session as the dollar weakened after the US Federal Reserve reaffirmed its outlook for two interest rate cuts this year. Fed Chair Jerome Powell also downplayed the inflationary impact of President Donald Trump’s tariffs, calling them as likely short-lived or transitory. Meanwhile, the Bank of Japan held its policy rate steady at 0.5% on Wednesday, as expected. Policymakers signaled a cautious stance, opting to assess the impact of global economic risks, particularly higher US tariffs, on Japan’s economy. The BOJ also emphasized its close monitoring of foreign exchange markets and their influence on economic conditions and prices.

Japanese Yen Strengthens on Dovish Fed Signals

The Australian dollar fell below $0.635 on Thursday, marking its third straight decline, as traders reassessed the Reserve Bank of Australia’s monetary policy outlook following weaker-than-expected jobs data. Australia’s unemployment rate held steady at 4.1% in February, but employment unexpectedly declined, raising concerns about labor market softness. Earlier this week, RBA Assistant Governor Sarah Hunter reiterated that February’s rate cut was meant to ease restrictive policy, but emphasized that the board remains more cautious than markets about further rate cuts. Market expectations for the next RBA rate cut remain divided, with some analysts forecasting a move as early as May, while others anticipate it in July or August.

Australian Dollar Slips on Weak Jobs Data

The dollar index hovered around 103.4 on Thursday, near a five-month low, after the Federal Reserve held rates steady but reaffirmed its outlook for two interest rate cuts this year. Officials said they still see another half percentage point of rate reductions through 2025 despite uncertainties around President Donald Trump’s policies on trade, taxes and deregulation. The central bank also lowered its US growth forecast while raising its inflation outlook. However, Fed Chair Jerome Powell downplayed concerns over tariffs, calling their impact on inflation as likely short-lived or transitory. Markets are now aligning with the Fed’s projections, pricing in two rate cuts this year, with the first expected in June or July. Investors are also awaiting weekly jobless claims data on Thursday for further labor market insights.

Dollar Struggles as Fed Signals Rate Cuts

The dollar index pared some gains but remained in the green on Wednesday to trade around 103.7 as traders react to the FOMC decision. The Fed kept the fed funds rate steady as expected and continued to signal two reductions in borrowing costs this year while also revising GDP growth projections lower and inflation higher.

Dollar Pares Some Gains

USDKRW increased to a 6-week high of 1464.00. Over the past 4 weeks, US Dollar South Korean Won gained 2.17%, and in the last 12 months, it increased 10.12%.

South Korean Won Hits 6-week Low

The DXY rose over 103.5 on Wednesday, halting the plunge that bottomed at the five-month low of 103.25 yesterday as the euro took a breather, while markets awaited new economic projections by FOMC members. The Federal Reserve is widely expected to hold its rates unchanged in its decision later today, and fresh dot plots in the Summary of Economic projections will indicate how policymakers currently weigh the pro-inflationary risks of tariffs against the threat they may bring to growth. Rate futures show that the market is currently positioned for two rate cuts by the central bank this year, in line with the FOMC's projections from last quarter. Data showed that the series of tariff threats by President Trump drove households and businesses to reconsider spending patterns and the economic outlook, with inflation expectations and import prices already rising sharply. In turn, growth concerns stemmed by trade barriers and lower public spending limited bets of a hawkish response.

US Dollar Index Edges Higher

USDINR decreased to a 5-week low of 86.45. Over the past 4 weeks, US Dollar Indian Rupee lost 0.01%, and in the last 12 months, it increased 3.95%.

Indian Rupee Hits 5-week High

The Turkish lira plunged as much as 12% to 41 per USD before paring some losses and settling above 39 per USD, still marking a fresh record low, amid rising political turmoil in Turkey. Istanbul’s mayor, Ekrem Imamoglu, one of Turkey’s most popular politicians and President Erdogan’s main rival, was detained on allegations of fraud and terror, after authorities revoked his university diploma, a move that could bar him from running against Erdogan. The Turkish lira has been trading at record lows as the central bank continues its foreign exchange market interventions while maintaining a cautious policy stance. Policymakers implemented another 25bps rate cut in March, bringing the benchmark policy rate down to 42.5%, in line with expectations. Although the central bank governor stressed that policymakers are not on "autopilot" to cut borrowing costs, analysts anticipate the rate will decline to around 30% by year-end.

Turkish Lira Sinks on Political Turmoil

The Japanese yen slipped to around 149.5 per dollar on Wednesday, marking its fourth consecutive day of decline after the Bank of Japan kept interest rates unchanged at 0.5%, as widely expected. The central bank maintained its view that Japan’s economy will likely continue growing above potential but acknowledged some signs of weakness. Policymakers also signaled a cautious stance, preferring to assess how mounting global economic risks—particularly higher US tariffs—could impact the domestic economy. Traders now await BOJ Governor Kazuo Ueda’s post-meeting remarks for further insights. Meanwhile, the monthly Reuters Tankan survey showed Japanese manufacturers turned pessimistic in March due to concerns over US tariffs and a slowing Chinese economy. Separate data revealed Japan’s trade balance swung to a surplus in February, driven by strong exports.

Japanese Yen Weakens as BOJ Holds Rates Steady

The Australian dollar stabilized around $0.636 on Wednesday after a volatile start to the week, as investors continued to assess the Reserve Bank of Australia's monetary policy outlook. On Tuesday, RBA Assistant Governor Sarah Hunter stated that February’s interest rate cut was intended to ease restrictive policy but emphasized that the board remains more cautious than markets about further rate cuts. She also noted that the central bank is closely monitoring US policy shifts to gauge their impact on the global economy, domestic activity, and inflation. Traders now turn their attention to upcoming Australian employment data, which could provide further insights into the labor market’s strength.

Breaking News

Follow what's happening with real-time updates from around the world.