17 August, 2025

FX Trends Over the Week

Asian currencies saw a mixed performance this week with most staying range-bound. The Indonesian Rupiah (IDR) and Malaysian Ringgit (MYR) led gains, strengthening 0.8% and 0.7% respectively. The Hong Kong Dollar (HKD) and Singapore Dollar (SGD) posted modest gains, while the Indian Rupee (INR) edged up 0.1%. Meanwhile, the Korean Won (KRW), Thai Baht (THB), and Taiwan Dollar (TWD) weakened, losing between 0.2%–0.5%. The Philippine Peso (PHP) and Chinese Yuan (CNH) closed flat.

The Rupee traded in a narrow 87.39–87.75 band and ended the week at 87.56 onshore, marking a mild appreciation from the previous week’s close of 87.71. Despite this, macroeconomic data painted a weaker backdrop. India’s trade deficit widened sharply in July to USD 27.4 billion, up from USD 18.8 billion in June, and well above market expectations of USD 20.4 billion. The surge was driven by higher imports, which rose to USD 64.6 billion.

Forward yields maintained an upward-sloping term structure, with the 1-month forward premium at 1.63% annualized, gradually rising to 2.93% for 5 years. Meanwhile, 3-month at-the-money-forward (ATMF) implied volatility stood at 4.40%, with the curve up to 1 year appearing relatively flat, indicating a stable near-term outlook for option pricing.

On the reserves front, the RBI added USD 4.7 billion in the week ending 8th August, taking India’s FX reserves to USD 693.6 billion—providing a comfortable cushion against external vulnerabilities.

Overall, while the Rupee held steady amid regional currency volatility, the widening trade deficit remains a key factor to watch in the coming weeks.