Core Viewpoint - The Indian rupee has experienced significant volatility, prompting the central bank to implement emergency measures to stabilize the currency amid a backdrop of geopolitical tensions in the Middle East and substantial foreign capital outflows from the Indian market [1][2][3]. Group 1: Currency and Market Reactions - On March 30, the Indian rupee initially surged by 1.48% against the US dollar but later fell, closing at 94.84 rupees per dollar, reflecting ongoing instability [2][3]. - The Reserve Bank of India announced new regulations effective April 10, requiring banks to limit their unhedged positions in the domestic market to $100 million at the end of each trading day, aimed at curbing aggressive short positions on the rupee [2][3]. - The Nifty Bank Index dropped over 4%, and the SENSEX Index fell by more than 2% on the same day, indicating a broad market decline [1][3]. Group 2: Foreign Investment and Economic Impact - Since the escalation of tensions in the Middle East, the Indian rupee has depreciated nearly 4%, making it the worst-performing currency in Asia this year [3]. - Foreign investors have withdrawn approximately $12 billion from the Indian stock market, with bond markets experiencing a record outflow of $1.6 billion in March [3][4]. - Analysts predict that prolonged conflict in the Middle East could further negatively impact India's economic growth, with potential GDP growth dropping from 7.2% to 6.5% if oil prices remain high [6][4]. Group 3: Energy Costs and Government Response - India, as the third-largest crude oil importer, faces rising energy costs exacerbated by geopolitical tensions, with 85% to 90% of its oil needs met through imports [6][8]. - The Indian government has reduced special consumption taxes on gasoline and diesel by 10 rupees per liter to mitigate the impact of rising global oil prices on domestic fuel costs [7][9]. - The increase in energy import expenditures and a slowdown in remittances from the Middle East are expected to widen India's current account and fiscal deficits, potentially accelerating capital outflows [9].

Core Viewpoint - India is facing a significant economic crisis due to the depreciation of the Indian Rupee, which has prompted the central bank to implement emergency measures to stabilize the currency and prevent further losses in the banking sector [2][4]. Group 1: Currency and Market Impact - The Indian Rupee experienced a volatile trading session, initially rising by 1.48% against the US dollar before declining, ultimately trading at 94.84 INR per USD, reflecting a decrease of 0.06% [3]. - The Reserve Bank of India announced a new regulation requiring banks to limit their unhedged foreign exchange positions to $100 million at the end of each trading day, aimed at curbing aggressive short positions on the Rupee [4]. - The banking sector warned that forced liquidation of positions could lead to losses exceeding $30 billion, contributing to a significant drop in bank stocks, with the Nifty Bank Index falling over 4% and the SENSEX Index dropping more than 2% [2][5]. Group 2: Foreign Investment and Economic Outlook - The ongoing conflict in the Middle East has led to a record outflow of foreign capital from India, with approximately $12 billion leaving the stock market and $1.6 billion from bonds in March alone [5]. - Analysts predict that if the geopolitical situation persists, it could further exacerbate the outflow of foreign investment, potentially impacting India's GDP growth, which may decline from 7.2% to 6.5% [7]. - The proportion of funds reducing their allocation to India has increased to 68%, indicating a growing lack of confidence among foreign investors [7]. Group 3: Energy Costs and Government Response - India, as the third-largest crude oil importer, is facing soaring energy costs, with crude prices rising from approximately $70 to $122 per barrel, which is expected to strain the economy further [8]. - The Indian government has responded by reducing special consumption taxes on gasoline and diesel by 10 INR per liter to mitigate the impact of rising global oil prices on domestic fuel prices [8]. - The increase in energy import expenditures and a slowdown in remittances from the Middle East are anticipated to widen India's current account and fiscal deficits, further accelerating capital outflows [8].

Group 1 - The Indian Rupee is supported in the range of 90.70 to 90.80, which is seen as significant following the recent US-India trade agreement [1] - Strong domestic liquidity in India is boosting investor sentiment, with the Reserve Bank of India injecting liquidity and maintaining a surplus of approximately 3 trillion Indian Rupees [1] - The US Dollar index has been declining for four consecutive trading days, trading around 96.70, ahead of the upcoming US employment report [1] Group 2 - Market expectations indicate that the Federal Reserve will maintain current interest rates in March, with the first potential rate cut in June [2] - The US inflation expectations have eased, with the median future inflation expectation dropping to 3.1%, the lowest in six months [2] - A temporary trade framework has been established between the US and India, aimed at reducing tariffs and enhancing bilateral economic cooperation, contributing to a significant appreciation of the Indian Rupee [2] Group 3 - The USD/INR pair has retraced from the nine-day moving average, trading around 90.70, with a neutral to bearish momentum indicated by the RSI [4] - Initial support for the currency pair is near the 50-day exponential moving average at 90.50, with potential for further decline if this level is breached [4] - Resistance is noted at the nine-day moving average around 90.83, with potential upward movement targeting the historical high of 92.51 reached on January 28 [4]

Group 1 - The Indian Rupee has shown signs of recovery due to improved equity inflows, with foreign investors net buying approximately $250 million in Indian stocks, bringing the total for the month to about $1.5 billion, a significant turnaround from nearly $4 billion outflow in January [1] - The recent temporary trade framework between the US and India is a key factor supporting the Indian Rupee, aimed at reducing bilateral tariffs and enhancing economic cooperation, resulting in the strongest weekly gain for the Rupee in over three years [1][2] - The trade agreement includes India committing to purchase over $500 billion in US goods while reducing or eliminating tariffs on various US industrial and agricultural products, which is expected to bolster trade relations and stabilize the Rupee [2] Group 2 - The overall weakening of the US Dollar has indirectly affected the USD/INR exchange rate, with the Dollar Index declining for three consecutive days, currently around 96.80 [2] - Market consensus suggests that the Federal Reserve will likely maintain interest rates in March, with the first rate cut expected in June, influenced by easing inflation expectations [3] - Discrepancies among Federal Reserve officials regarding economic conditions and inflation risks have heightened market caution towards the Dollar, amplifying its volatility [4] Group 3 - Technical analysis indicates a bearish trend for the USD/INR pair, with current trading around 90.80, below the critical resistance level of 91.00 [6] - Initial support is identified at approximately 90.50, with potential declines to 89.50 if this level is breached, while resistance is noted at 90.90, with further gains possible towards the historical high of 92.51 [6]

Core Insights - The US and India have reached a trade agreement, significantly reducing tariffs on Indian goods from 50% to 18%, which has positively impacted Indian financial markets [1][2][3] - The Nifty 50 index surged nearly 5%, approaching its historical high from January, while the Indian rupee appreciated over 1% against the US dollar [1][2][3] - The agreement is expected to alleviate long-standing negative factors affecting the Indian market, potentially leading to a resurgence of foreign investment [2][3][4] Market Reactions - The Nifty 50 index's increase positions it for its best single-day performance in five years, and the rupee is on track for its largest single-day gain since November 2022 [1][3] - Following the announcement, foreign investors, who had been net sellers, may adjust their asset allocation towards Indian markets [2][4] Economic Context - The trade agreement follows a period of adverse effects on the Indian market due to increased tariffs imposed by the US in late August, which led to significant foreign capital outflows [3]

1. Report Industry Investment Rating - No information about the report industry investment rating is provided in the content. 2. Core Viewpoints of the Report - This week, the U.S. Treasury yields showed a pattern of long - end rising and short - end falling, with the yield curve becoming steeper. The market still bets on a possible easing cycle later this year, driving down short - term interest rates, while long - term inflation and term premium expectations are under pressure due to uncertainties in fiscal and trade policies, budget deficits, and potential threats to the Fed's independence [1][12]. - The Fed maintained the federal funds rate target range at 3.50%–3.75% as expected in the January FOMC meeting. The Fed revised up its outlook on the U.S. economy, believing that economic growth momentum has strengthened, the labor market has shown signs of stabilization, and inflation remains high but has not deteriorated further [2][12]. - Trump nominated Kevin Warsh as the next Fed Chair. Warsh's past stance was hawkish, but he has shown signs of turning dovish recently. His future policy stance will be an important observation indicator for the market [2][13]. 3. Summary According to the Directory 3.1 U.S. Treasury Yield Review This Week 3.1.1 Warsh's Nomination and the Steepening of U.S. Treasury Yields - This week (January 23 - January 30, 2026), the changes in U.S. Treasury yields were as follows: 1 - month (-6bp, 3.72%), 1 - year (-5bp, 3.48%), 2 - year (-8bp, 3.52%), 5 - year (-5bp, 3.79%), 10 - year (+2bp, 4.26%), 30 - year (+5bp, 4.87%). The yield curve became steeper [1][12]. - The Fed maintained the federal funds rate target range at 3.50%–3.75% in the January FOMC meeting. Waller and Milan voted against, advocating a 25bp rate cut. The Fed revised up its outlook on the U.S. economy [2][12]. - Trump nominated Kevin Warsh as the next Fed Chair. Warsh defeated other candidates. His past stance was hawkish, but he has shown dovish signs recently [2][13]. 3.1.2 This Week's U.S. Treasury Auctions - On January 26, a $69 billion 2 - year U.S. Treasury bill auction was held. The winning yield was 3.580%, the bid - to - cover ratio was 2.75 times, and the tail was - 1.375 [18]. - On January 27, a $70 billion 5 - year U.S. Treasury bill auction was held. The winning yield was 3.823%, the bid - to - cover ratio was 2.34 times, and the tail was 0.300 [18]. - On January 29, a $44 billion 7 - year U.S. Treasury bill auction was held. The winning yield was 4.018%, the bid - to - cover ratio was 2.45 times, and the tail was 0.175 [19]. 3.2 U.S. Macroeconomic Indicator Comments - The U.S. PPI in December had a monthly环比 increase of 0.5%, much higher than the market expectation of 0.2%, and a year - on - year increase of 3%, indicating persistent inflation risks. The U.S. consumer confidence index in January dropped 9.7 points to 84.5, lower than the forecast of 90.6, hitting the lowest level since May 2014, reflecting consumers' increased concerns about the economic outlook [3][27]. - The Fed maintained the federal funds rate in the 3.5% - 3.75% range, pausing the easing cycle after three consecutive rate cuts. This decision reflects the Fed's recognition of the current economic resilience and its difficult balance between high inflation and a weak labor market [3][28]. - The number of initial jobless claims in the week ending January 24 decreased to 209,000, slightly lower than the previous week's revised figure of 210,000 and slightly higher than the market expectation of 206,000. The number of continued claims decreased to 1.827 million, the lowest since September 2024, showing a mild and stable labor market [3][28]. 3.3 Comments on Major Asset Classes - **Bonds**: German bond yields fell across the board, and Japanese bond yields fluctuated slightly overall. The decline in German bond yields was due to the market's expectation of the ECB maintaining or relaxing monetary policy. The movement of Japanese bond yields was affected by the slowdown in inflation and the Bank of Japan's cautious policy stance [30]. - **Equities**: Global equity markets were significantly differentiated, with Asian markets performing strongly. The top three gainers were the Korea Composite Index (+4.70%), the Hang Seng Index (+2.38%), and the India Sensex30 (+0.90%). The top three losers were the Vietnam VN30 (-2.31%), the German DAX (-1.45%), and the Nikkei 225 (-0.97%) [31]. - **Commodities**: Bitcoin, LME aluminum, and the hog index were under pressure. The top three gainers were Brent crude oil (+7.30%), London silver (+4.23%), and LME copper (+3.48%). The top three losers were Bitcoin (-5.97%), LME aluminum (-2.05%), and the hog index (-1.36%) [32]. - **Foreign Exchange**: The Japanese yen, Swiss franc, and South Korean won strengthened, while the U.S. dollar and some Asian currencies declined. The top three gainers were the Japanese yen (+2.99%), the Swiss franc (+2.60%), and the South Korean won (+1.78%). The top three losers were the Indian rupee (-0.58%), the Hong Kong dollar (-0.37%), and the U.S. dollar (-0.24%) [33]. 3.4 Market Tracking - The report provides multiple charts showing the changes in bond yields, stock indices, commodity prices, and foreign exchange rates of major global economies this week, as well as the latest economic data panels of the United States, Japan, and the Eurozone [35][38][41][43][46][53][58].

Group 1 - The recent decline of the US dollar index has raised concerns about "de-dollarization" and geopolitical risks, prompting market attention [1][15] - Bloomberg Industry Research predicts that the Chinese yuan and Malaysian ringgit could generate excess returns for Asian currency portfolios due to structural advantages and reduced correlation with the dollar [1][15] - The relative performance of low-interest and high-interest Asian currencies will depend on the timing of the "de-dollarization" trend [1][15] Group 2 - Zhao Zhixuan, Bloomberg's Chief Forex and Rates Strategist for Asia, suggests that the dollar index may need to fall below 90 to trigger policy intervention, indicating further downside potential from current levels [1][15] - The yuan is expected to be the most favored currency this year, with the USD/CNY exchange rate potentially challenging the 6.7 to 6.8 level [1][11] - The dollar faces multiple structural challenges, including portfolio rotation away from US assets, ongoing arbitrage trading, and expectations of a weak dollar policy [1][15] Group 3 - European institutions, including Danish pension funds, have begun to exit the US Treasury market, with China's holdings of US debt at their lowest level since 2008 [2][16] - The trend of reducing US Treasury holdings is likely to continue, but a complete sell-off is unrealistic due to the lack of alternative markets with similar depth and liquidity [2][16] - The future may see a coexistence of multiple reserve currencies and regionalization of currency use, although the dollar's leading position is unlikely to be replaced in the short term [2][16] Group 4 - Concerns over Japan's "monetary fiscalization" have led to selling pressure on its long-term bonds, which may transmit pressure to global bond markets [2][24] - The Japanese yen is expected to strengthen against the dollar this year, with a reasonable equilibrium exchange rate around 129 [2][24][25] - Other Asian currencies are expected to show divergence, with low-interest currencies like the Thai baht, Malaysian ringgit, and Singapore dollar benefiting from a declining dollar cycle [2][12] Group 5 - The yuan is viewed as the most promising currency this year, with expectations of steady appreciation against both the dollar and a basket of currencies [2][11][26] - Factors supporting the yuan's appreciation include favorable policies, interest rate differentials, and capital inflows from the stock market [2][11][26] - The Thai baht, Malaysian ringgit, and Singapore dollar are also expected to strengthen, while high-interest currencies like the Philippine peso, Indonesian rupiah, and Indian rupee may weaken due to fiscal stability concerns [2][12][29]

Market Performance - The CNX Nifty index in India closed up by 0.51% at 25,175.40 points, continuing a downward trend since reaching a record closing high of 26,328 points on January 2 and a record intraday high of 26,373.20 points on January 5 [1] - The mid-cap index rose by 0.59%, while the BSE Sensex index increased by 0.39%, and the BSE 500 index gained 0.50% [1] Currency and Bond Market - The Indian Rupee appreciated by 0.25% against the US Dollar, trading at 91.7238 Rupees, recovering from a historical low of 91.9713 Rupees set in the previous trading session [1] - The yield on the 10-year Indian government bond rose by 5.6 basis points to 6.719%, approaching the peak of 6.753% recorded on March 5, 2025, and the high of 7.618% from June 16, 2022 [1]

Group 1 - The Indian Rupee is facing multiple pressures, including foreign capital outflows, a strengthening US dollar, limited support from the central bank, and trade disputes with the US, pushing it to a one-month low [1][3] - As of January, foreign investors have withdrawn $1.6 billion from the Indian stock market, continuing a trend from the previous year where $17 billion was withdrawn, highlighting the increasing capital outflow issue [3][4] - The depreciation of the Rupee poses a dual threat to India, a net oil importer, as it raises inflation risks and erodes returns for foreign investors, with the Rupee down approximately 5% in 2025, making it the worst-performing currency in Asia [3][4] Group 2 - The capital outflow is the most direct pressure on the Rupee, with foreign investors withdrawing $1.6 billion from the Indian stock market in January alone, following a total of $17 billion in 2025 [4] - The delay in trade agreements with the US has further dampened market sentiment, with a proposed 50% tariff on Indian goods set to take effect on August 27, 2025 [4] - The reliance on volatile foreign capital inflows has increased, with MUFG Bank Ltd. adjusting its Rupee forecast to 92 by the end of September, down from a previous expectation of 90.80 [4]

Group 1: USD Dynamics - The core variable for the USD remains the Federal Reserve, with recent discussions indicating heightened congressional interest in monetary policy [3] - Multiple Federal Reserve officials have signaled that there is no urgent need for rate cuts, suggesting that the USD will have policy support in the short term [5] - The market is expected to experience more volatility from adjustments in expectations rather than a trend reversal [5] Group 2: EUR Challenges - The Eurozone is facing significant economic pressures, with Germany's economic growth projected at only 0.2% for 2025, highlighting a lack of momentum [6] - The European Central Bank's medium-term outlook shows inflation returning to target levels, but economic growth is expected to remain between 1.2% and 1.4%, which may not provide strong support for the Euro [6] - The Euro's performance is likely to depend more on relative stability rather than a clear strengthening [6] Group 3: JPY Outlook - The Japanese Yen is in focus due to potential interest rate stability and concerns over its weakness, with the possibility of coordinated intervention being discussed [7] - Internal divisions within the Bank of Japan suggest that interest rate hikes may occur sooner than the market currently anticipates, increasing sensitivity to news [7] - The volatility in the Yen impacts various sectors, including consumer spending and international trade [7] Group 4: Other Currencies and Regional Dynamics - Other regions are also experiencing significant developments, such as the UK delaying employment survey releases, reflecting challenges in data quality and policy judgment [8] - India aims to conclude trade negotiations with the EU by January 26, which could positively affect regional currencies and capital flows [8] - In Asia, Hong Kong's finance chief has stated there will be no reduction in stock stamp duty, while South Korea's finance minister emphasizes the need to halt excessive depreciation of the Won [8] - The overall forex market is characterized by a phase of "policy expectations driving dynamics and differentiated fundamentals" [8]