USD under pressure on Fed cuts and independence doubts

The USD is set to remain under pressure in the coming months as markets weigh further Fed rate cuts and questions over the Fed’s independence, a Reuters FX poll shows. The greenback has already shed nearly 10% y-t-d against a basket of peers — the weakest performance among major currencies — as the short-USD trade has dominated since late March.

(** Tap or click the headline above to read this story with all of the links to our background and outside sources.)

Survey respondents expect the trend to persist, with nearly 80% of strategists seeing net short positions rising or holding steady. “The [USD] will face some pressure to soften into the end of the year,” said HSBC’s Paul Mackel.

Over in Asia, the INR has been among the hardest hit, with the currency touching a record low of 88.33 against the USD on Monday before stabilizing after the Reserve Bank of India used part of its USD 690 bn in reserves to intervene, Reuters separately reported. It has fallen about 3% this year on USD 15 bn in equity outflows, compounded by Trump-era tariffs on Indian goods and tensions over Russian oil imports.

Some near-term relief has emerged: The INR has gained for two sessions, closing at 88.07 yesterday, supported by a softer USD index and stronger local equities, Reuters reports separately. A Reuters poll put the median forecast at 88.04 by month-end, though about one-third of analysts warn it could drift towards 90 if the 50% US tariff on Indian goods remains in place.

Longer-term projections are split: Many expect the INR to hold around 88 over the next year, but top forecasters at Nirmal Bang and HDFC see fresh lows near 90. “The RBI's role would be to prevent panic selling rather than defend any particular level,” said HDFC’s Sakshi Gupta, who projects 89.5 by this time next year.

For now, traders caution that positioning is heavily skewed against the USD, leaving both the USD and INR vulnerable to sharp swings if inflation surprises or trade tensions escalate. “A big risk is the fact everybody seems to think the [USD] is likely to weaken,” Rabobank’s Jane Foley warned.

OTHER PLANET FINANCE NEWS-

Global bonds stayed under pressure yesterday, with the US 30-year Treasury yield briefly hitting 5% for the first time since July before easing to 4.97%, the Financial Times and Reuters report. UK 30-year gilts touched 5.75%, while Japan’s equivalent rose to a record 3.29%. The sell-off was fueled by heavy sovereign issuance — including a record GBP 14 bn UK syndication on Tuesday — stubborn inflation, and political strains.

ICYMI- Government bond markets have been gripped by a global rout, with yields at multi-year highs on swelling debt loads, tariff uncertainty, and political turmoil across Europe, the US, and Japan.

MARKETS THIS MORNING-

Asian markets are in the green, tracking Wall Street gains that came on the back of a tech rally. The only outlier, Hong Kong’s Hang Seng, is currently in the red, despite trading in the green in early trade. Meanwhile, Wall Street futures largely point to another strong open despite jitters about the US economy following a weak jobs report — though the Dow Jones, which fell yesterday, could open in the red.

THE CLOSING BELL: TADAWUL-

The TASI fell 0.5% yesterday on turnover of SAR 3.3 bn. The index is down 11.8% YTD.

In the green: Thimar (+10.0%), Red Sea (+4.9%) and Masar (+2.8%).

In the red: Build Station (-3.8%), Riyadh Reit (-3.5%) and NCLE(-3.2%).

THE CLOSING BELL: NOMU-

The NomuC rose 0.1% yesterday on turnover of SAR 49.6 mn. The index is down 18.4% YTD.

In the green: Sign World (+16.7%), Edarat (+8.4%) and NAF (+8.3%).

In the red: Shalfa (-14.6%), Jana (-11.7%) and Asas Makeen (-9.3%).