Key Headlines

The Indian rupee spot against the US dollar end lower on Tuesday, after swing sharply in intra day trade due to heightening tension between India & neighbor country makes traders cautious on currency trade at time when near dated implied volatility near 2-year high. However, inflows hope after FII net buying in equity and fall in Crude oil prices support rupee at lower level.

The rupee at NSE Future 28 May-25. ended lower by 17 paise at 85.41 against previous close of 85.24 and after make low of 85.16 and high of 85.60. most Asian peers in positive as China's yuan strengthened to a one-month high, while the Malaysian ringgit was up nearly 1%.

The jitters have also pushed up the rupee's 1-month implied volatility to 5.5%, its highest since March 2023.

India Trade tension and geopolitical risks pose a challenge to India's economic growth in the fiscal year that started this month, potentially disrupting supply chains and pushing up prices, a finance ministry report said. "Uncertainties stemming from global developments constitute a key risk for the growth outlook for fiscal year 2025/26," the Ministry of Finance said in its monthly economic report released on Tuesday. The government said in its report that private companies and policymakers must remain alert to the growing risks and "act urgently" to prevent uncertainty from feeding on itself. It added that the federal government's projected path for reducing public debt would help boost the pool of domestic savings available for private investment, thereby supporting the economic growth.

The U.S. dollar drifted higher on Tuesday, lifted by the Trump administration's plan to ease the impact of auto duties on local car manufacturers as well as the prospect of more tariff deals with some trading partners.

The U.S. government said it plans to alleviate some duties placed on foreign parts in domestically manufactured cars and keep tariffs on cars made abroad from stacking on other duties. White House Press Secretary Karoline Leavitt said President Donald Trump will sign an executive order on auto tariffs on Tuesday.

the dollar rose 0.2% against the yen to 142.22. The dollar also gained against the euro, which slid 0.2% to $1.1395 . But Europe's shared currency showed steep gains for April of 5.4%, on pace for its largest monthly gain since November 2022. the dollar advanced 0.3% against the Swiss franc . For the month of April, however, the U.S. unit has fallen 7% so far, its heftiest monthly decline since January 2015.

Investors are also awaiting the April U.S. jobs report, due on Friday, where jobs growth is still expected, although at a sharply slower pace than a month earlier. The U.S. also releases first-quarter GDP data and the Federal Reserve's favored inflation gauge, core PCE, this week, while GDP and preliminary inflation figures are also due in Europe.

Markets swung to imply an approximately 55% chance of a Fed cut in May, and futures now point to more than 100 basis points worth of rate cuts by December this year . Investors were previously expecting the Fed to keep rates on hold next month.