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On Thursday, the Indian rupee fell to an all-time low, reflecting a broader decline among Asian currencies and a bearish outlook exacerbated by uncertainties surrounding U.S. trade tariffs and continued portfolio outflows. The rupee’s performance has been notably weak, making it the worst-performing currency in Asia for the year 2025.
During the trading session, the rupee touched a record low of 87.5825 before closing slightly higher at 87.5775, marking a 0.1% drop for the day and a decline of over 2% since the start of the year. Market sentiment has been bearish, with short bets on the rupee climbing to their highest levels since mid-July 2022, even as outlooks on other regional currencies have become less negative.
Volatility measures, such as the 1-month 25 delta dollar-rupee risk reversal, have increased, indicating that the cost of options betting against the rupee has gone up compared to those betting on its appreciation. This trend is accompanied by a rise in dollar demand driven by the frequent expiration of non-deliverable forward positions, which has also contributed to the rupee’s weakness.
Despite these challenges, the Reserve Bank of India (NSE:BOI) (RBI) has been active in the market, implementing interventions to curb the rupee’s losses. On Thursday, the central bank reportedly conducted dollar-rupee buy/sell swaps, a strategy it has used in recent trading sessions to manage the liquidity effects of its spot dollar sales.
The dollar index, which measures the U.S. currency against a basket of six major peers, rose 0.3% to 108 after reaching a one-week low on Wednesday. Market players are assessing the potential impact of a global trade war, which seemed less likely after U.S. President Donald Trump decided to delay tariffs on Canada and Mexico. MUFG Bank expressed cautious optimism that a wider global tariff war might be avoided, which could reduce the inflationary risk of Trump’s policies on the U.S. economy.
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