USD/INR

Wednesday in Asian currency markets began with an oppressive calm. Asian currencies did not move. The dollar did not move. The dollar index (DXY) remained frozen after four days of decline. Everyone stood still. Like rabbits before a predator. Or like traders ahead of the most important event of the week — the meeting of the U.S. Federal Reserve, the first under new Chairman Kevin Warsh.

USD/JPY — the Japanese yen — fell by 0.1% to 160.30. It was a symbolic move. Even after the Bank of Japan raised its rate to 1.0% the previous day — the highest in 31 years — the yen did not strengthen. Because everyone is waiting for the Fed.

USD/CNY — the Chinese yuan — was unchanged. USD/SGD — the Singapore dollar — was unchanged. USD/INR — the Indian rupee — fell by 0.3%, but this was a local move. AUD/USD — the Australian dollar — was unchanged after the RBA kept rates steady.

Only USD/KRW — the South Korean won — rose by 0.4%, breaking away from the general trend. But even this was likely linked to a tech rally in Samsung and SK Hynix shares rather than currency policy.

The reason for the calm is anticipation. Traders do not want to open new positions ahead of the Fed meeting. Uncertainty is too high. The risks are too large.

There is also the peace agreement between the U.S. and Iran. Details are becoming clearer. On Tuesday, the first concrete terms emerged. The agreement provides for the immediate resumption of Iranian oil exports. Iran agrees not to develop nuclear weapons and freezes its nuclear program for 60 days for negotiations.

This is positive for markets. But traders want to see a signed document, not just words. So they wait.

So what is happening in...

Tuesday: A Day of Historic Decisions and No Market Reaction

Tuesday began with an event that, under normal circumstances, would have shaken currency markets to their core. The Bank of Japan raised its short-term policy rate by 25 basis points to 1.0% — the highest level in 31 years. The last time Japanese interest rates stood at this level was in 1995, when the internet was still in its infancy and many of today's traders had not even been born.

The decision passed by a 7–1 vote. Governor Kazuo Ueda did not attend the meeting as he is currently undergoing medical treatment in the hospital. The meeting was chaired by Deputy Governor Shinichi Uchida instead. It is an unusual situation: the head of the central bank was absent during a historic policy decision.

And what happened?

Virtually nothing.

USD/JPY barely moved. The yen remained around ¥160.23 per dollar, only slightly different from levels seen before the announcement. Traders who expected a rate hike to strengthen the yen were left disappointed.

Why?

Because markets had already priced in the move over recent weeks. The real surprise would have been if the Bank of Japan had not raised rates. Since the hike was widely expected, the market reaction was essentially zero.

The yen continues to trade near the psychologically important ¥160-per-dollar level. Back in April, when the dollar first broke above ¥160, Japanese authorities intervened in the currency market. This time, they have remained on the sidelines, apparently viewing ¥160 as an acceptable exchange rate with policy rates at 1.0%.

But let's take a closer look at what is actually happening across Asian currency markets on Tuesday, why most currencies appear frozen in place, and what traders are waiting for from other central banks.

Bank of Japan: A Historic Move Without the...

Tuesday Morning: The Dollar Retreats, Asia Recovers

On Tuesday morning, currency traders around the world finally allowed themselves a brief moment of relief. Not celebration, not relaxation—just a chance to exhale after weeks of relentless tension. Asian currencies, which had been under heavy pressure from a strengthening U.S. dollar for the past two weeks, suddenly moved higher across the board.

The gains were modest—half a percent here, a quarter percent there—but the fact that they were rising at all while the dollar retreated from a two-month high was notable.

The U.S. Dollar Index (DXY), which measures the greenback against a basket of six major currencies, slipped 0.1% to just below the 100 mark, trading at 99.96. A day earlier, it had reached 100.21. The difference may seem insignificant—just 0.25%—but in the foreign exchange market, where billions of dollars move between currencies in fractions of a second, such a shift is meaningful.

So what changed? Why did the dollar, which had looked so strong on Friday and Monday, suddenly lose momentum?

The answer lies in the Middle East.

After exchanging missile strikes over the weekend, Israel and Iran ultimately stepped back from the brink. A ceasefire brokered with significant involvement from U.S. President Donald Trump appears to be holding, at least for now. The agreement is fragile and far from perfect, but it has reduced the immediate risk of a full-scale regional war.

That matters because it lowers the probability of oil prices surging toward $150 per barrel and reduces fears of a major disruption to global trade. Investors who had rushed into the U.S. dollar as a safe haven felt comfortable taking a step back.

South Korean Won and Indian Rupee Lead the Gains

Among Asian currencies, two stood out: the South Korean won and the Indian rupee.

The South...

In recent weeks, the Indian rupee has looked like a punching bag—hitting seven consecutive record lows, slipping close to 97 per dollar, and triggering waves of panic headlines in the local press. But if we step back from the day-to-day volatility and look at the broader picture, a more nuanced—and surprisingly less alarming—reality emerges.

ING analysts have examined the rupee's situation under a microscope and reached a clear conclusion: yes, the currency is likely to remain under pressure as long as oil prices stay elevated. However, the risk of a disorderly collapse—the kind that forces central banks into emergency rate hikes and sends the IMF scrambling to prepare rescue packages—appears limited. India has come a long way since 2013 and now stands on a much stronger foundation.

Oil Shock: Why It Hurts Less Than Before

Back in 2013, when the Federal Reserve merely hinted at reducing monetary stimulus, the rupee plunged and India found itself on the brink of a balance-of-payments crisis. At the time, the current account deficit had reached nearly 5% of GDP, foreign exchange reserves were thin, and the country's dependence on oil imports seemed like a structural vulnerability.

Today, the picture is very different. ING expects India's current account deficit to widen to around 2.1% of GDP in 2026. For comparison, it was roughly 0.5% last year. The increase is driven almost entirely by higher oil prices. India still imports more than 80% of the crude oil it consumes, and when oil becomes more expensive, the import bill inevitably swells.

But a deficit of just over 2% of GDP is not the same as 5%. It remains a manageable level that does not threaten macroeconomic stability. Why? Because India has diversified its sources of energy supply. Whereas the country once depended heavily on a small group...

Monday on Asian currency markets began with a sight rarely seen in recent weeks — the dollar was retreating while currencies from Tokyo to Mumbai moved higher in unison. The U.S. dollar index slipped by two-tenths of a percent, and futures on the index fell by roughly the same amount. The move was modest, barely noticeable on the charts, but behind it stood a tectonic shift in sentiment. The reason was a few words spoken by Donald Trump over the weekend. Words that may have marked the beginning of the end of this year’s most destructive geopolitical crisis. And Asian currencies, being among the most sensitive barometers of global risk appetite, reacted instantly.

Trump the Peacemaker: “Largely Agreed”

Over the weekend, the U.S. president made a statement markets had been waiting months to hear. The United States and Iran had “largely agreed” on a framework deal to resolve the conflict. The key point was the resumption of shipping through the Strait of Hormuz — the very artery whose blockade had sent oil prices soaring and triggered a global chain reaction of inflation. Separate sources added further detail: Iranian and Pakistani mediators also reported progress. The picture looked almost idyllic.

But Trump would not be Trump without adding a note of uncertainty to the optimism. Almost immediately after the encouraging statement, he clarified that he was in no hurry to finalize a deal. Iran, for its part, largely rejected U.S. demands regarding the transfer of enriched uranium stockpiles — one of the most contentious points in the negotiations. Contradictory signals, mixed messages, swings between hope and skepticism. Classic Trump diplomacy, in which no one knows until the very last moment whether an agreement will be signed or another escalation will follow.

Still, markets exhausted by months of uncertainty chose to focus...

Monday morning on India’s currency market began with the very thing everyone — from oil importers to owners of street stalls selling imported goods — had been desperately waiting for. The rupee, which only on Friday had been staring into the abyss near the 97-per-dollar mark, suddenly reversed course and began to climb. The USD/INR pair fell by half a percent to 95.70 — a move that may seem modest after weeks of relentless decline, yet one whose psychological significance can be compared to the first breath of air for a drowning man. And the reason for this reversal was neither market forces nor global macroeconomic shifts. The reason was a man. One man who uttered a few sentences in an interview with the newspaper Mint.

Malhotra Steps Into the Ring: “The Rupee Is Undervalued, and We Will Do Whatever It Takes”

Sanjay Malhotra, governor of the Reserve Bank of India, is not known for making blunt public statements. Central bankers usually speak in shades, hints, and carefully crafted phrases whose interpretation has become a profession of its own. But this time, Malhotra seemed to cast diplomacy aside. His statement rang out like a gong: the rupee is undervalued. The RBI will do whatever is necessary to prevent further weakening of the currency.

“Whatever is necessary” is not a phrase central bankers throw around lightly. It is a signal that traders call a verbal intervention. And when it comes from the man controlling the foreign exchange reserves of the world’s seventh-largest economy, the market has no choice but to listen. Because words may be followed by action. And judging by recent developments, they already have been — last week the RBI actively intervened, steering USD/INR away from record highs. Malhotra made it clear these interventions were not a one-off operation,...

The 96.8650 level that USD/INR pierced this week is not just another number flashing across traders’ screens. It is a diagnosis. Seven consecutive all-time highs are not how healthy markets behave during temporary stress — this is how a system behaves when some fundamental safeguard has broken down. The rupee has fallen before; there have been crashes and speculative panics. But the current situation stands out for its relentless, almost hopeless consistency. The currency is not merely weakening — it is losing the ability to find a bottom. And while the world watches the standoff in the Strait of Hormuz with fascination, the real drama is unfolding not on the decks of destroyers, but in the corridors of the Reserve Bank of India and on the balance sheets of Indian importers staring in horror at their dollar-denominated invoices.

The Oil Trap: Anatomy of a Curse

The entire structure of the Indian economy resembles a building erected on barrels of crude oil. This is neither exaggeration nor literary metaphor. India is the world’s third-largest oil consumer, yet unlike the other members of this uneasy top three, it possesses very little domestic production. More than 80% of the oil the country consumes is imported, sending foreign currency flowing to Saudi Arabia, Iraq, and — in less tense times — Iran.

When oil trades around seventy dollars a barrel, this structure can still maintain balance. But when prices surge by more than fifty percent in just a few months, as they have since late February, the current account begins to crack under the pressure.

The mechanics of this destruction are simple and ruthless. Indian refiners now require far more dollars to pay for the same physical volume of imports. They enter the foreign exchange market and aggressively sell rupees to buy U.S. currency....