Forex News

• The Indian Rupee falls back against the US Dollar on Wednesday after a slight recovery move the previous day.
• Fears of global energy supply disruption intensify on Bab el-Mandeb Strait closure.
• FIIs turned out to be net buyers on Tuesday.

The Indian Rupee (INR) opens lower against the US Dollar (USD) on Wednesday after a slight relief the previous day. The USD/INR pair rises to near 96.53 as a fresh surge in oil prices due to intensifying fears of further global energy supply disruptions has weakened the Indian currency.

In the opening trade, the MCX Crude Oil contract expiring on August 19 posts a fresh over five-week high at Rs. 8,253.

Currencies from economies, such as India, which rely heavily on oil imports to meet their energy needs, tend to underperform in a high oil price environment.

Yemen Houthis close Bab el-Mandeb Strait

The closure of the Bab el-Mandeb Strait, the southern gateway of the Red Sea, by Yemen's Iran-aligned Houthis that halts oil exports from Saudi Arabia to Asian economies in retaliation for a Saudi blockade of ports and airports in Houthi-controlled north-western Yemen, has escalated fears of further energy supply disruption.

According to a Reuters report, the Bab el-Mandeb Strait closure could reduce global oil supply by 7%. This comes at a time when overall energy supply is already squeezed due to the closure of the Strait of Hormuz, a critical chokepoint to almost 20% of global energy supply.

The Saudi-led coalition has strongly criticized Iran’s action, saying, “Such ​threats are a blatant violation of international law and fall under acts of maritime piracy,” Reuters reports.

Earlier in the day, US Secretary of State Marco Rubio told Southeast Asian foreign ministers that Iranian control of the Hormuz would set a “dangerous precedent with repercussions beyond the Middle East”.

FIIs selling streak halts on Tuesday

Foreign Institutional Investors (FIIs) turned out to be net buyers on Tuesday after remaining net sellers for six straight trading days. On Tuesday, overseas investors pumped an investment worth Rs. 1,650.16 crore. In the July 13-20 period, FIIs offloaded their stake worth Rs. 10,240.80 crore.

However, the sentiment of foreign investors toward the Indian equity market is expected to remain depressed as surging oil prices will increase the import bill of the Indian government, a scenario that diminishes the center’s ability to invest in infrastructure and development.

Technical Analysis: USD/INR reflects strength as 20-day EMA advances

USD/INR trades higher at around 96.53, maintaining a bullish near-term bias as it holds above the 20-period exponential moving average (EMA) at 95.7889.

The pair is extending its recent advance, and the Relative Strength Index (14) at 62.38 stays in positive territory, hinting that buyers still retain control.

On the downside, immediate support is located at the 20-period EMA at 95.79, where a pullback could attract fresh buying interest as long as this floor holds. Looking up, the pair aims to revisit the all-time high at around 97.10.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

Following his meeting with Chinese Foreign Minister Wang Yi in Manila on Wednesday, United States (US) Secretary of State Marco Rubio said that “Iran is in a lot of trouble.”

Additional quotes

Nothing China has done has changed the trajectory of the conflict with Iran.

In fact, in some cases China has been cooperative on the Iran situation.

Would love to reach a diplomatic settlement with Iran.

China and the US have differences but the job is to manage that.

There are areas of potential cooperation.

Disagree with China's activities on Taiwan.

Discussed trade among other things.

Middle East risks keep Brent elevated as Saudi flows face fresh disruption

Analysts at Rabobank warn that Middle East supply routes remain highly fragile, with “Hormuz remains on a knife-edge, with most flows halted save those taking the Iranian route.” They highlight that the situation has deteriorated further after “two tankers carrying Saudi crude made U-turns in the Red Sea after a Houthi warning,” describing this as “the first sign of the threatened blockade of Saudi ports.” Against this backdrop, Rabobank argues that the latest escalation will “not allow energy markets to ‘take the summer off’ rather than taking off,” noting that “we are at $91.5 on Brent at time of writing with crack spreads still round $70.”

Derek Halpenny at MUFG explains that US trade tariff uncertainty is set to re-emerge as Section 122 measures expire and are replaced by more targeted Section 301 actions. He expects widespread investigations and tariffs that broadly replicate current measures, with USD/Asia seen most vulnerable to upside. G10 FX should be less affected, though prolonged uncertainty could eventually trigger US Dollar selling.

Section 301 actions and Dollar impact

"The US will use Section 301 and investigations have already been announced against most of the key trading partners of the US although when implemented and against what products remains unclear."

"The fact that these tariffs should broadly replicate the Section 122 tariffs, means the FX implications should be limited."

"However, the path to implementation is less predictable with greater potential differentiations that could see increased FX volatility."

"The fact this latest bout of trade policy uncertainty comes at a time when the rates curve in the US is priced for hikes and Middle East risks are higher could mean the FX reaction function is different and is more US dollar supportive."

"USD/Asia would perhaps be where you could see most upside where yield would be less of a counter to say the impact on USD/LatAm."

"G10 FX should be less impacted and if the uncertainty becomes more prolonged and pronounced, we could see US dollar selling re-emerge as investors grow more concerned over unpredictable policies from Washington and the damage to the US economy."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

• Gold hits resistance at the $4.140 area but remains steady above $4,100.
• Geopolitical tensions and higher oil prices have failed to dent Gold's recovery.
• XAU/USD bulls are likely to be challenged in the area between $4,140 and $4,200.

Gold (XAU/USD) extends gains for the fourth consecutive day on Wednesday, standing comfortably above $4,100, unfazed by the risk-off market amid rising tensions in Iran and higher Oil prices. The pair has rallied nearly 2.5% so far this week and is on track for its best weekly performance in more than three months.

The precious metal has shown some hesitation on Wednesday's European session, amid concerns that the US-Iran war might escalate out of control as US President Donald Trump threatened to strike nuclear facilities, which, according to Tehran, will extend the conflict throughout the region. 

Apart from that, news reports that three Saudi Arabian Oil tankers have turned around in the Red Sea following the Houthis’ announcement of a blockade boosted Oil prices higher, providing additional support to the US Dollar, which has been closely correlated to Crude prices since Iran’s war started.

Technical Analysis: Resistances at $4.140 and $4,200 are likely to challenge bulls

XAU/USD trades at $4,120, holding a bullish immediate bias after breaching the downward trendline resistance from late May highs. The bullish momentum is supported by the 4-hour Relative Strength Index (14), which hovers in the mid-60s, and the positive Moving Average Convergence Divergence (MACD), which together suggest buyers retain control.

Upside attempts, however, remain capped below the July 9 high, near $4,140, which, together with the July 3 high, at the $4,200 area, are likely to test bulls' confidence. Further up, the next target is the mid-June highs, at the $4,360 area.

On the downside, immediate support is seen at the broken trendline break zone around $4,020 ahead of the year-to-date lows around $3,950. Further down, the late October 2025 low just below $3,900 emerges as the next target.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

Societe Generale analysts highlight USD/JPY trading in breakout territory above 163 for the first time in nearly four decades, with support around 162.20 and resistance near 164.40. Technical commentary points to an extended uptrend after clearing a consolidation range, while Japanese officials’ warnings of appropriate action have yet to deter Yen bears despite a wider June trade deficit.

Breakout holds above 163

"USD/JPY climbs up to 163.24, FinMin Katayama and Cabinet Secretary Kihara repeat warning of appropriate action as needed."

"Spot in breakout territory above 163 for first time in nearly four decades. Katayama/Kihara jawboning not compelling to repel yen bears."

"USD/JPY recently evolved within a narrowing range but successfully held above the 50-DMA. It has now broken above the upper boundary of this consolidation, indicating the potential for a further extension of the uptrend. "

"The next objectives are located at projections of 163.70/164.40 and 165.40. Signals of an extended pullback are not yet visible. The low established earlier this week around 162.20 could be the first support."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

• USD/CHF trades around 0.8120, declining by a modest 0.09% on Wednesday.
• Escalating tensions between the United States and Iran are keeping the US Dollar supported despite a modest intraday decline.
• Higher Swiss bond yields reflect concerns over geopolitical risks and rising energy prices.

USD/CHF trades around 0.8120 at the time of writing on Wednesday, down a modest 0.09% on the day, but remains supported by a strong risk-off environment that favors the US Dollar (USD). Investors continue to seek the Greenback as tensions in the Middle East escalate, reducing hopes for a diplomatic de-escalation.

Hostilities between the United States (US) and Iran have now entered their eleventh consecutive day. US President Donald Trump dismissed the prospect of immediate negotiations with Tehran following the exchange of military strikes and threatened to target Picaxe Mountain, a site believed to house nuclear facilities. In response, Tehran warned that any attack on these facilities would expand the conflict across the region.

Tensions have also spread to global shipping routes. Houthi rebels announced a blockade of the Bab el-Mandeb Strait, prompting three Saudi Oil tankers to turn back in the Red Sea. The situation has renewed concerns about disruptions to global energy supplies and continues to underpin demand for safe-haven assets.

In Switzerland, the 10-year government bond yield is hovering around 0.45%, close to its highest level in two months. Rising energy costs driven by geopolitical tensions are prompting markets to reassess the outlook for inflation and monetary policy. Despite these developments, the Swiss National Bank (SNB) kept its policy rate unchanged at 0% at its latest meeting, maintaining that inflation is expected to remain broadly stable over the medium term.

USD/CHF support builds as SNB tolerates weaker Swiss Franc and safe-haven bid fades

Analysts at ING argue that “USD/CHF rather than USD/JPY could become an increasingly popular vehicle for these summer months,” noting that the SNB “is not going to surprise with $70bn of FX intervention (as the BoJ did in April/May).” In their view, “the SNB probably welcomes this weaker Swiss Franc,” with the central bank “look[ing] to be one of the last central banks to hike” at a time when “higher energy prices and higher rates in general deliver wider interest rate differentials against Swiss rates.” ING says it has “been discussing a higher USD/CHF over recent weeks,” adding that “if energy prices have another leg higher, USD/CHF could deliver some powerful follow-through on a break of 0.8150/70 resistance,” and that “high oil and high equity prices look set to keep USD/JPY and USD/CHF supported.”

Strategists at Rabobank observe that “CHF net shorts have fallen for a third week,” as “CHF’s Iran war-driven safe-haven rally has faded, while SNB intervention warnings have helped limit speculative demand.” Against this backdrop, Rabobank expects “EUR/CHF consolidating around 0.92 over three months and USD/CHF near 0.81 in H2,” suggesting a period of range trading rather than renewed aggressive safe-haven inflows into the Franc.

The British Pound (GBP) is facing renewed downward pressure across major currency pairs, forfeiting its recent gains as market participants digest a combination of cooling domestic inflation and growing fiscal uncertainty surrounding Prime Minister Andy Burnham’s economic agenda. 

While softer price pressures offer welcome news for UK consumers, they also temper expectations for aggressive Bank of England (BoE) interest rate hikes, weighing on the Pound. Simultaneously, cost-of-living relief proposals have reignited long-term debt sustainability fears.

Softening inflation remove hawkish pressure from the Bank of England

Macro economists at ING emphasize that despite a slightly elevated core inflation reading, the underlying trajectory of UK price pressures is distinctly disinflationary. A second consecutive monthly decline in food prices combined with falling petrol costs presents a favorable backdrop for consumer inflation expectations. Crucially, the BoE's preferred core services metric slowed from 3.8% to 3.6%, signaling that domestic price drivers are easing and dampening the necessity for further rate hikes by the Bank of England.

The trend looks good, and together with low private-sector wage growth, suggests domestically-generated inflation is benign right now (...) Sterling is a little weaker on the data and EUR/GBP may well have put in a significant low at 0.8455 last week.

Cost-of-living relief measures reignite UK debt sustainability worries

Market strategists at Commerzbank warn that early optimism surrounding Prime Minister Burnham’s administration has rapidly given way to fiscal anxiety. Details of Burnham's agenda to lower the cost of living (including temporary VAT cuts on electricity bills, higher personal tax allowances, and expanded social housing) have raised immediate questions regarding funding, given the absence of corresponding tax increases. This fiscal gap has triggered concerns over long-term UK sovereign debt, completely reversing Sterling's recent advance against the Euro.

"At the very least, Burnham’s promise of a ‘new economic model’ for the UK does not suggest that he will shy away from major measures. This, in turn, entails considerable risks for an already fragile market sentiment. Pound investors may face a volatile period."

Banks anticipate a volatile trajectory for British Pound

The banks project a soft and volatile near-term trajectory for the British Pound. ING suggests that the combination of benign domestic inflation and slowing private-sector wage growth will keep Sterling on the back foot, establishing 0.8455 as a potential key structural floor for EUR/GBP. Meanwhile, Commerzbank cautions that until the government presents a clear, credible blueprint to balance fiscal sustainability with economic growth, Sterling will remain vulnerable to sudden sentiment shifts and elevated volatility.

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

Silver prices (XAG/USD) rose on Wednesday, according to FXStreet data. Silver trades at $59.50 per troy ounce, up 1.19% from the $58.80 it cost on Tuesday.

Silver prices have decreased by 16.29% since the beginning of the year.

The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, stood at 69.21 on Wednesday, down from 69.34 on Tuesday.

(An automation tool was used in creating this post.)

• NZD/USD could find support as hot inflation figures reinforce market expectations for a September RBNZ rate hike.
• Hot inflation validated RBNZ warnings, boosting expectations for further policy tightening after July's first rate hike in three years.
• Rising US-Iran geopolitical tensions drive safe-haven demand amid growing risk aversion.

NZD/USD extends its losing streak for the fifth successive day, trading around 0.5810 during the European hours on Wednesday. However, the New Zealand Dollar (NZD) could find support as hot inflation figures have reinforced market expectations that the Reserve Bank of New Zealand (RBNZ) will deliver another interest rate hike in September.

New Zealand’s annual inflation accelerated to 4.1% in Q2, up from 3.1% in Q1, topping both market expectations of 4.0% and the central bank's forecast of 3.9%. Reaching its highest level since Q4 2023, inflation remains well above the RBNZ's 1–3% target range.

The hot reading reinforces recent warnings from RBNZ Chief Economist Paul Conway regarding sticky inflation, boosting expectations for further policy tightening following the central bank's July 8 rate hike, its first in three years.

The NZD/USD pair remains subdued as the US Dollar (USD) may regain its ground amid growing risk aversion tied to escalating geopolitical tensions between the United States and Iran.

CME FedWatch Tool indicates that markets are currently pricing in over 69% odds of at least a 25 basis-point rate hike at the upcoming September meeting. However, the Fed is widely expected to leave the federal funds rate unchanged. Despite this anticipated pause, expectations for tighter policy remain elevated beyond July.

Commerzbank’s Tatha Ghose reports that Hungary’s central bank Magyar Nemzeti Bank (MNB) cut its base rate to 5.75%, in line with expectations, and maintained its summer easing narrative. Despite recent Forint correction, the bank still sees room for further cuts while preserving positive real rates, with a reassessment in September. Communication was mildly dovish, though HUF continues to outperform peers like the Polish Zloty.

Mini easing cycle continues

"Hungary's National Bank (MNB) cut its base rate by 25bp to 5.75% yesterday, as had been unanimously expected by analysts. The decision itself did not carry surprise. MNB had already restarted its easing cycle in June, and the subsequent guidance had signalled room for further cuts during the summer months if favourable inflation and financial-market developments persisted."

"The more interesting message was that MNB did not use the recent correction in the forint as reason to back away from the mini easing cycle. The post-meeting statement noted that inflation developments had been more favourable than the June baseline, while the lower risk premium on domestic assets had persisted (we could argue the opposite – because HUF weakened sharply when the Iran war re-started – but, MNB’s view appears more reasonable)."

"Looking ahead, MNB sees room to further decrease the base rate throughout the summer, while maintaining a positive real interest rate; the continuation of the cycle will then be reassessed using the September Inflation Report. This message added some dovish surprise/tilt to MNB’s messaging."

"Mihaly Varga’s press conference broadly reinforced this message. Varga emphasised that the macro outlook remains broadly in line with the June Inflation Report, with inflation softer than expected, but energy prices somewhat higher and the Middle East conflict still a risk. He also repeated that a stable exchange rate is important for lowering and anchoring inflation expectations."

"On balance, yesterday’s communication was mildly dovish because Varga left an August cut on the table and postponed the bigger debate until September. The forint may have briefly weakened because of dovish MPC signals, but relative to peers such as the Polish zloty it holds on to its outperformance since the beginning of the year – the latest reversal is hardly noticeable."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)