ICYMI from yesterday:China new bank lending stumbles once again in 2025PBOC to cut rates on various structural policy tools by 25 bpsThe People’s Bank of China is due to set the daily USD/CNY reference rate at around 0115 GMT (2115 US Eastern time), a fixing that remains one of the most closely watched signals in Asian foreign exchange markets. China operates a managed floating exchange rate system, under which the renminbi (yuan) is allowed to trade within a prescribed band around a central reference rate, or midpoint, set each trading day by the PBOC. The current trading band permits the currency to move plus or minus 2% from the official midpoint during onshore trading hours. Each morning, the PBOC determines the midpoint based on a range of inputs. These include the previous day’s closing price, movements in major currencies, particularly the US dollar, broader international FX conditions, and domestic economic considerations such as capital flows, growth momentum and financial stability objectives. The midpoint is not a purely mechanical calculation, allowing policymakers discretion to guide market expectations. Once the midpoint is announced, onshore USD/CNY is free to trade within the allowable band. If market pressures push the yuan toward either edge of that range, the central bank may step in to smooth volatility. Intervention can take the form of direct buying or selling of yuan, adjustments to liquidity conditions, or guidance through state-owned banks. As a result, the daily fixing is often interpreted as a policy signal rather than just a technical reference point. A stronger-than-expected CNY midpoint is typically read as a sign the PBOC is leaning against depreciation pressure, while a weaker fixing for the CNY can indicate tolerance for a softer currency, often in response to dollar strength or domestic economic headwinds.In periods of heightened global volatility, such as shifts in US rate expectations, trade tensions or capital flow pressures, the fixing takes on added significance. For investors, it provides insight into Beijing’s currency priorities, balancing competitiveness, capital stability and financial market confidence. This article was written by Eamonn Sheridan at investinglive.com. 🔗 Source 💡 DMK Insight China’s bank lending slump signals deeper economic issues, and here’s why that matters for traders: The latest data shows a continued decline in new bank lending, which raises concerns about the overall health of China’s economy. This could lead to further easing measures from the People’s Bank of China (PBOC), including the anticipated 25 basis point rate cut. For forex traders, this is crucial as it may weaken the yuan against the dollar, impacting USD/CNY trading strategies. If the PBOC sets the daily reference rate lower, we could see a significant shift in market sentiment, especially among institutions looking to hedge against yuan depreciation. But here’s the flip side: while a weaker yuan might seem negative, it could also boost Chinese exports, potentially benefiting commodities and related markets. Traders should keep an eye on the USD/CNY levels around the recent fixings, as any unexpected adjustments could trigger volatility. Watch for the PBOC’s next moves closely, as they could set the tone for broader market trends in the coming weeks. 📮 Takeaway Monitor the USD/CNY reference rate closely; a lower fixing could signal increased volatility and trading opportunities in forex markets.

Summary:West Virginia bill would allow up to 10% of treasury assets into metals and digital assetsOnly bitcoin currently meets the bill’s $750bn market-cap requirementStablecoins would require explicit regulatory approvalSimilar proposals have emerged across the U.S., with limited success so farPolitical support for the bill remains uncertainWest Virginia bill opens door to state investment in bitcoin and precious metals. What could possibly go wrong?A U.S. state lawmaker has proposed legislation that would allow West Virginia’s treasury to allocate a portion of its reserves into precious metals and select digital assets, adding to a growing but still limited push by state governments to gain exposure to alternative stores of value.Under a bill introduced this week by Chris Rose, West Virginia’s Board of Treasury would be permitted to invest up to 10% of its holdings in precious metals, qualifying digital assets and approved stablecoins. The proposal, titled the Inflation Protection Act, is framed as a hedge against inflation and currency debasement rather than a wholesale shift in treasury management strategy.The bill specifies that any eligible digital asset must have recorded a market capitalisation above $750 billion in the prior calendar year. As of January, that threshold would limit exposure to Bitcoin alone, effectively excluding smaller cryptocurrencies and reinforcing the bill’s emphasis on liquidity and scale.According to the draft legislation, digital assets held by the state could be custodied through a qualified third-party custodian, an exchange-traded product, or another secure custody solution. Stablecoins would face tighter constraints, requiring explicit regulatory approval from either the U.S. federal government or individual states before being eligible for treasury investment.West Virginia would not be alone in exploring such an approach. Several U.S. states have debated similar measures over the past year, though legislative success has been uneven. While numerous bills were introduced in 2025, only a small number of states — including Texas, Arizona and New Hampshire — have ultimately passed laws allowing for some form of state-level crypto reserve or investment framework.At this stage, the political outlook for the West Virginia proposal remains uncertain. The bill has been referred to the legislature’s Committee on Banking and Insurance, where it will face scrutiny over risk management, volatility and fiduciary responsibility. There is no clear indication yet that it has sufficient support to advance to a full vote.For markets, the proposal highlights a broader trend of governments beginning to acknowledge alternative assets, often after significant price appreciation has already occurred. While such moves may add to the narrative legitimacy of bitcoin and precious metals, they also risk being late-cycle signals rather than catalysts for sustained upside. —For bitcoin, the bill reinforces its positioning as a macro hedge and reserve-style asset rather than a speculative token. However, given bitcoin’s strong performance in recent years, incremental government interest is unlikely to be a major upside catalyst on its own and may instead signal growing mainstream saturation.For precious metals, particularly gold and silver, the proposal aligns with their traditional role as inflation hedges. Yet, similar to crypto, official-sector interest typically emerges after prolonged rallies, suggesting demand validation rather than fresh momentum.Overall, while such legislation supports the long-term legitimacy of alternative assets, it may also argue for caution on near-term price expectations. Buy some gold they say. It’ll be fun, they say. This article was written by Eamonn Sheridan at investinglive.com. 🔗 Source 💡 DMK Insight West Virginia’s new bill could shift treasury asset strategies, and here’s why that’s crucial: Allowing up to 10% of treasury assets into metals and digital assets, particularly Bitcoin, signals a growing acceptance of crypto in traditional finance. With Bitcoin being the only asset meeting the $750 billion market cap requirement, this could lead to increased institutional interest and liquidity. If this bill gains traction, it might set a precedent for other states, potentially igniting a wave of similar legislation. However, the political support remains shaky, which could stall progress. Traders should keep an eye on Bitcoin’s price action, especially around key support and resistance levels. If Bitcoin can hold above recent highs, it might attract more institutional players looking to capitalize on this legislative shift. Watch for any announcements regarding regulatory approvals for stablecoins as well; that could further influence market sentiment. The next few weeks will be critical for gauging the bill’s impact and the broader acceptance of crypto in state treasuries. 📮 Takeaway Monitor Bitcoin’s price closely; a sustained move above recent highs could signal increased institutional interest as West Virginia’s bill progresses.

Summary:Fed’s Daly says monetary policy is “in a good place” to respond to economic shiftsIncoming data show solid growth, stabilising labour market and easing inflationFed cut rates by 75bps last year to offset labour-market coolingUncertainty remains around both inflation and employment risksDaly signals preference for patience and deliberate calibrationU.S. monetary policy is currently well placed to respond to how the economy evolves, but future decisions will need to be made carefully and deliberately given lingering uncertainties around both inflation and employment, San Francisco Federal Reserve President Mary Daly said on Thursday, US time. Daly said recent U.S. economic data have been encouraging, with growth projections remaining solid, the labour market showing signs of stabilisation, and inflation expected to continue easing through 2026. Taken together, those trends suggest the economy is moving closer to balance after a period of elevated price pressures and cooling employment conditions.Daly noted that the Federal Open Market Committee cut interest rates by a cumulative 75 basis points last year in response to a marked slowdown in labour-market momentum and inflation outcomes that proved milder than previously expected. Those moves, she said, were designed to prevent the economy from weakening too sharply while keeping progress toward price stability intact.Despite the improved backdrop, Daly cautioned that uncertainty remains high. Risks persist on both sides of the Federal Reserve’s dual mandate of maintaining price stability and achieving maximum employment, underscoring the need for a measured approach going forward. “We will need to be deliberate as we calibrate policy,” she said, emphasising that the central bank must balance the risk of doing too much against the risk of doing too little.Her remarks come ahead of the Fed’s January 27–28 policy meeting, where officials are widely expected to leave interest rates unchanged in the current 3.50%–3.75% range after a run of rate cuts last year. In Fed-watcher parlance, Daly’s description of policy being in a “good place” is typically interpreted as signalling comfort with holding rates steady while assessing how earlier easing works through the economy.Daly also stressed that policymaking cannot rely solely on individual data releases. While economic data, analysis and models remain critical, she said direct feedback from businesses, households and communities provides valuable insight into underlying conditions and future trends that may not yet be visible in official statistics.By combining quantitative data with real-world intelligence, Daly said the Fed can better respond to changes in the outlook and ensure monetary policy remains appropriately calibrated as the economy moves into its next phase. This article was written by Eamonn Sheridan at investinglive.com. 🔗 Source 💡 DMK Insight Fed’s Daly just gave a thumbs up to the current monetary policy, and here’s why that matters: With SOL currently at $143.01, traders should pay close attention to how this dovish stance could impact risk assets. The Fed’s emphasis on patience suggests they won’t rush into rate hikes, which typically supports higher asset prices. If inflation continues to ease and the labor market stabilizes, we could see a bullish sentiment across crypto and equities. SOL, being a prominent altcoin, might benefit from this environment as investors look for growth outside traditional markets. However, keep an eye on potential volatility. If incoming data shifts unexpectedly—say, if inflation spikes or employment numbers falter—SOL could face downward pressure. The $140 support level is crucial; a break below could trigger stop-losses and exacerbate selling. Watch for any Fed comments or economic indicators in the coming weeks that could sway market sentiment. The next few days could be pivotal for SOL and other altcoins as traders react to these macroeconomic signals. 📮 Takeaway Monitor SOL’s $140 support level closely; any break below could lead to increased selling pressure amid shifting economic indicators.

Earlier:PBOC is expected to set the USD/CNY reference rate at 6.9722 – Reuters estimateThursday:China new bank lending stumbles once again in 2025PBOC to cut rates on various structural policy tools by 25 bpsPBOC injects 86.7bn yuan through 7-day reverse repos at an unchanged rate of 1.4%. This article was written by Eamonn Sheridan at investinglive.com. 🔗 Source 💡 DMK Insight The PBOC’s recent rate cuts and lending struggles are shaking up the forex market, especially for USD/CNY. With the USD/CNY reference rate set at 6.9722, traders should be on high alert. The PBOC’s decision to inject 86.7 billion yuan through reverse repos indicates a liquidity push, but the underlying weakness in new bank lending suggests an economy struggling to gain traction. This could lead to increased volatility in the yuan, impacting not just forex traders but also commodities priced in USD, like oil and gold. If the yuan weakens further, it could trigger a flight to safety in USD-denominated assets, affecting crypto markets as well. Here’s the thing: while the mainstream narrative might focus on the immediate effects of these rate cuts, the longer-term implications could be more significant. If the PBOC continues down this path, we might see a sustained depreciation of the yuan, which could lead to broader market shifts. Keep an eye on the 7-day reverse repo rate and any further adjustments to the lending rate as indicators of the PBOC’s next moves. 📮 Takeaway Watch for USD/CNY movements around the 6.9722 level; further yuan weakness could impact crypto and commodity markets significantly.

Summary:Trump expected to announce emergency power auction on FridayTech firms would be forced to fund new power plants for data centresPJM would run the auction, potentially backing $15bn of new generationAim is to curb electricity price rises hitting householdsData-centre demand seen as key driver of grid strainPresident Donald Trump is expected to announce an unprecedented intervention in U.S. power markets, unveiling plans for an “emergency power auction” that would require major technology companies to directly fund new electricity generation to support the rapid expansion of data centres.Under the proposal, the country’s largest grid operator, PJM Interconnection, would be directed to run a special reliability auction designed to accelerate the construction of new power plants. The initiative could underpin as much as $15 billion in new generation capacity, according to officials familiar with the plan.The move reflects growing concern within the administration and among state leaders that surging electricity demand from artificial intelligence and cloud-computing infrastructure is outpacing supply, pushing household power bills higher and fuelling political backlash. PJM’s network spans 13 states from the Mid-Atlantic to the Midwest and serves more than 67 million people, making it one of the most exposed regions to data-centre-driven demand growth.Under the proposed structure, technology companies would bid for long-term contracts tied to new power generation, effectively paying to secure the electricity required for their data centres. The aim is to ensure the cost of new power plants does not fall on households, while addressing reliability concerns on an overstretched grid.Trump has repeatedly argued that data-centre operators should bear responsibility for the power they consume, saying this week he does not want American households paying higher electricity bills because of AI infrastructure. Electricity affordability has become a central political issue ahead of November’s midterm elections, with power prices continuing to rise even as fuel costs have eased.U.S. electricity prices have climbed sharply over the past year, with the average retail electricity price rising to a record, adding pressure to household budgets already strained by higher living costs.The administration is framing the auction as a one-off emergency measure rather than a permanent shift in market design, intended to stabilise prices and ensure adequate supply before demand accelerates further. If implemented, the plan could also set a precedent for how other regions manage the collision between AI-driven power demand and aging electricity infrastructure. This article was written by Eamonn Sheridan at investinglive.com. 🔗 Source 💡 DMK Insight Trump’s emergency power auction could reshape energy markets, and here’s why that’s crucial for traders: The proposed auction, set to be managed by PJM, aims to address rising electricity prices driven by surging demand from data centers. With a potential backing of $15 billion for new generation, this move could stabilize energy costs, impacting sectors reliant on electricity, including tech and crypto mining. Traders should keep an eye on how this affects energy stocks and related commodities, as any significant changes in electricity pricing can ripple through these markets. But there’s a flip side: if the auction fails to attract sufficient investment or if operational costs rise unexpectedly, we could see volatility in energy prices. This is especially relevant for traders in the crypto space, where mining operations are heavily dependent on electricity costs. Watch for any announcements regarding the auction results or changes in demand forecasts, as these could signal shifts in market sentiment. Key levels to monitor include the current electricity price trends and any adjustments in data center expansion plans. 📮 Takeaway Keep an eye on the upcoming auction results and electricity price trends, as they could significantly impact energy stocks and crypto mining costs.

Summary:China is removing high-speed traders’ servers from exchange data centresFutures exchanges in Shanghai and Guangzhou are enforcing the changesDomestic and global trading firms will be affectedLatency advantages for high-frequency traders will be reducedMove aligns with broader push for market stabilityChina has moved to rein in high-speed and algorithmic trading by stripping one of the sector’s key advantages: ultra-fast access to exchange data centres. According to Bloomberg (gated), regulators have directed commodities exchanges to remove client servers, particularly those used by high-frequency traders, from facilities operated by the bourses themselves.People familiar with the matter said futures exchanges in Shanghai and Guangzhou are among those ordering local brokers to relocate servers for their clients out of exchange-run data centres. While the measure affects a broad range of market participants, high-frequency trading firms are expected to feel the greatest impact due to their reliance on minimal latency.Under the current timeline, the Shanghai Futures Exchange has told brokers that servers used by high-speed trading clients must be removed by the end of next month, with other clients facing a later deadline of April 30. The move is being led by regulators and applies to both domestic and foreign trading firms.The clampdown is set to hit China’s large cohort of domestic quantitative funds, while also affecting major global players active in the country. Firms including Citadel Securities, Jane Street and Jump Trading are among those whose access to exchange-proximate servers is being curtailed, according to the people.By forcing servers out of exchange facilities, authorities are undermining the speed advantage that high-frequency traders gain by colocating equipment close to matching engines. Even a delay of a few milliseconds can materially affect strategies in markets where execution speed is critical, particularly in stock index futures, commodities and convertible bonds.Adding to the impact, some futures exchanges are considering imposing an additional two milliseconds of latency on servers connecting from third-party data centres, further narrowing the gap between high-speed traders and other investors.The move forms part of a broader regulatory push to level the playing field and reinforce market stability after Chinese equities and futures rallied to multi-year highs. Regulators have recently tightened margin trading rules and increased scrutiny of certain exchange-traded fund trades, particularly those involving foreign market makers.While high-frequency traders add liquidity, Chinese authorities have long been uneasy about the execution advantages they enjoy. This latest step signals a renewed determination to curb those benefits, even if it reshapes trading strategies and market dynamics. This article was written by Eamonn Sheridan at investinglive.com. 🔗 Source 💡 DMK Insight China’s crackdown on high-speed trading is a game changer for market dynamics. By removing high-frequency traders’ servers from exchange data centers, the government is leveling the playing field, which could lead to increased volatility as traditional traders adjust to the new landscape. This move aligns with China’s broader strategy for market stability, but it also raises questions about liquidity and execution speed. Traders should keep an eye on how this impacts futures markets in Shanghai and Guangzhou, especially if we see a shift in trading volumes or patterns. The ripple effects could extend to global markets, particularly in sectors heavily influenced by algorithmic trading. Watch for potential price swings in related assets, as reduced latency for high-frequency traders might lead to more erratic price movements in the short term. In the coming weeks, monitor trading volumes and volatility indicators closely, as these will provide insight into how effectively traditional traders adapt to this new environment. 📮 Takeaway Keep an eye on trading volumes and volatility in Shanghai and Guangzhou futures markets; this shift could lead to increased price swings in the short term.

Japan’s Finance Minister Katayama delivered a clear warning to currency markets, reiterating Tokyo’s readiness to act against excessive yen moves:“Intervention included as an option in U.S.-Japan agreement.”“I have said ready to take decisive action without ruling out any options.”“Won’t exclude any options” when asked about the possibility of U.S.–Japan joint intervention.The remarks underline Japan’s growing unease with recent yen volatility and signal that authorities are keeping the full range of countermeasures firmly on the table.With this, Japan has stepped up its verbal defence of the yen. Finance Minister Katayama explicitly confirming that foreign-exchange intervention remains an option under existing understandings with the United States. The comments come as renewed weakness in the yen revives concerns over imported inflation, market disorder and policy credibility.Katayama’s remarks reinforce Tokyo’s long-standing stance that sharp, speculative-driven currency moves are undesirable. By stressing that intervention is “included as an option” in the U.S.–Japan framework, the finance minister sought to remind markets that Japan is not acting in isolation and retains diplomatic cover should it decide to step in.Of particular note was Katayama’s refusal to rule out any options, including the prospect of coordinated U.S.–Japan intervention. While such joint action is rare and typically reserved for periods of extreme market stress, the reference alone is designed to raise the perceived cost of betting aggressively against the yen. Discussing possible joint intervention always carries more weight with JPY traders, increasing their wariness of holding short yen positions.The renewed warning follows a period of sustained yen weakness, driven by wide interest-rate differentials between Japan and the United States and expectations of further fiscal spending in Japan. Even as the Bank of Japan has begun to normalise policy after years of ultra-loose settings, Japanese yields remain far below U.S. levels, limiting the currency’s natural support.Historically, Japanese authorities have preferred to rely on verbal intervention first, escalating to actual market operations only when moves become disorderly or one-sided. The last episodes of yen-buying intervention were framed as responses to excessive volatility rather than targeting any specific exchange-rate level.The backdrop is complicated by heightened political sensitivity around currency moves. A weak yen boosts export competitiveness but also raises import costs for energy and food, squeezing households at a time when inflation remains a key public concern. That tension helps explain why officials continue to emphasise readiness for “decisive action.”For now, Katayama’s comments stop short of signalling imminent intervention. But by explicitly referencing joint action with the United States and refusing to rule out any tools, Japan has delivered a clear message: authorities are watching closely, and tolerance for rapid or destabilising yen moves is limited. This article was written by Eamonn Sheridan at investinglive.com. 🔗 Source 💡 DMK Insight Japan’s Finance Minister just dropped a bombshell on currency traders: intervention is back on the table. This isn’t just talk; the mention of a U.S.-Japan agreement hints at coordinated action if the yen continues to weaken. Traders should be on high alert, especially if the yen approaches critical levels that could trigger intervention. The last thing anyone wants is a sudden spike in volatility, which could affect not just the yen but also related assets like USD/JPY and even broader forex pairs. If you’re holding positions in these markets, consider tightening your stop-loss orders to mitigate potential risks. Keep an eye on the 145 level for USD/JPY; a breach could prompt immediate action from Tokyo. But here’s the flip side: if the yen stabilizes and the intervention doesn’t happen, we might see a short squeeze in the dollar, pushing it higher against other currencies. So, watch for signs of yen strength or weakness in the coming days, as this could dictate market sentiment across the board. 📮 Takeaway Monitor the 145 level in USD/JPY closely; intervention could trigger volatility, so adjust your positions accordingly.

Summary:The yen rose after Finance Minister Katayama reiterated intervention remains an optionReuters reports some BOJ policymakers see scope for earlier hikes, with April in playBOJ expected to hold at 0.75% in January, but debate on timing is activeWeak yen is seen inside BOJ as adding to broadening inflation pressureBOJ may lift FY2026 growth and inflation forecasts in next week’s reviewThe yen strengthened after Japan’s Finance Minister Katayama reiterated that foreign-exchange intervention remains on the table, and gains were reinforced by a Reuters report suggesting some policymakers inside the Bank of Japan (BOJ) see scope to raise interest rates sooner than markets currently expect.Katayama’s remarks, delivered earlier, signalled Tokyo’s readiness to act against excessive currency moves, including the possibility of joint action with the United States. That rhetoric helped lift the yen by increasing the perceived risk of official pushback against further depreciation.The move was compounded by an “exclusive” Reuters report citing four sources familiar with BOJ thinking, which said some policymakers view April as a realistic window for another rate hike if evidence continues to build that Japan can achieve its 2% inflation target on a durable basis. While the BOJ is widely expected to keep its policy rate steady at 0.75% at its January meeting, the sources said many policymakers see scope for further tightening, and some would not rule out action as early as April.That timeline would be earlier than prevailing market and private-sector expectations, which Reuters noted are centred on a move around mid-year. In a Reuters poll, most economists expected the next hike in July, with a strong majority seeing the policy rate reaching 1% or higher by September.A key driver of the internal debate is the yen itself. The Reuters report said the risk that a weak yen could add to already broadening inflationary pressure is drawing increasing attention within the BOJ. Yen depreciation raises the cost of imported fuel, food and raw materials, and could encourage companies to pass through higher costs into a wider range of consumer prices, potentially complicating the BOJ’s assumption that cost-push inflation will moderate smoothly.Reuters also reported that the BOJ is likely to raise its fiscal 2026 growth and inflation forecasts in its quarterly review due next week. Current forecasts from October projected 0.7% growth and 1.8% core inflation for fiscal 2026, but sources suggested those numbers may be revised higher.The April BOJ meeting is emerging as a focal point because it follows the annual wage negotiation season and coincides with a new round of forecasts, giving policymakers fresh information on wage momentum, demand resilience and inflation persistence. A shift toward earlier tightening would mark a more hawkish reaction function, particularly if yen weakness is increasingly viewed as a catalyst for action.For markets, the combination of intervention rhetoric and a potentially more hawkish BOJ narrative provides near-term support for the yen, even if the longer-run direction remains sensitive to U.S.–Japan rate differentials and global risk sentiment. This article was written by Eamonn Sheridan at investinglive.com. 🔗 Source 💡 DMK Insight The yen’s recent rise signals a potential shift in monetary policy sentiment, and here’s why that matters: Finance Minister Katayama’s comments on intervention suggest the government is ready to act if the yen weakens further, which could lead to increased volatility in forex markets. With some Bank of Japan (BOJ) policymakers hinting at earlier rate hikes, possibly as soon as April, traders should be on high alert. The current expectation is for the BOJ to maintain rates at 0.75% in January, but any shift in this stance could trigger significant market reactions. A weak yen is contributing to rising inflation, and if the BOJ pivots, it could lead to a stronger yen and impact related assets like commodities and equities. Look for key technical levels around recent highs and lows in the USD/JPY pair. If the yen strengthens, watch for resistance around 140.00, while support could be tested near 145.00. The market’s reaction to any BOJ announcements or economic data releases in the coming weeks will be crucial, especially as traders position themselves ahead of potential rate changes. 📮 Takeaway Monitor USD/JPY closely; a break below 145.00 could signal a stronger yen, especially if BOJ policy shifts in April.

Summary:MUFG sees India’s 10-year yield edging higher through 2026Bank forecasts 6.60% by March and 6.75% by year-endRBI seen at end of rate-cut cycle, repo rate held at 5.25%Liquidity injections via bonds and FX swaps to continueUSD/INR likely driven more by global factors than local yieldsIndia’s benchmark government bond yields are likely to drift modestly higher over the course of 2026, as the Reserve Bank of India (RBI) approaches the end of its rate-cutting cycle while continuing to manage liquidity aggressively, according to MUFG.In a research note, MUFG said it expects India’s 10-year benchmark bond yield to rise gradually to around 6.60% by March and toward 6.75% by the end of the year, from current levels near 6.65%. The bank characterised the outlook as one of upward bias rather than sharp tightening, reflecting a policy environment that is shifting from easing toward an extended hold.MUFG said it believes the RBI has effectively reached the end of its rate-cutting cycle and expects the central bank to keep the repo rate unchanged at 5.25% for a prolonged period. With inflation risks appearing broadly contained and growth holding up, policymakers are seen as favouring stability over further stimulus or premature tightening.While policy rates may be on hold, liquidity management is expected to remain highly active. MUFG expects the RBI to continue injecting liquidity through bond purchases and foreign-exchange swaps through 2026, reinforcing its role in smoothing funding conditions even as rates remain steady. The scale of past intervention underscores that commitment: in 2025, the RBI injected a record 11.73 trillion rupees into the banking system via bond buying, FX swaps and a reduction in the cash reserve ratio.The bond-market outlook also has implications for the currency. The Indian rupee (attached USD/INR chart) highlights a steady (INR) downward grind, with the pair recently trading around the 90.30 area USD/INR bounced from intervention lows. . A mild rise in domestic yields could offer some support to the rupee at the margin, particularly if U.S. rate expectations stabilise. However, MUFG’s view that liquidity will stay abundant suggests that yield support for the currency may be limited.Instead, USD/INR is likely to remain driven by broader dollar dynamics, capital flows and RBI FX operations rather than domestic rate moves alone. Continued RBI liquidity injections and FX swaps also point to an ongoing effort to dampen currency volatility rather than defend any specific level.Overall, MUFG’s outlook suggests a year of relative stability for Indian bonds, with modest yield drift higher, an RBI firmly on hold, and a rupee that remains range-bound but sensitive to global forces rather than domestic tightening pressure. This article was written by Eamonn Sheridan at investinglive.com. 🔗 Source 💡 DMK Insight India’s 10-year yield forecast to rise could shake up the USD/INR dynamics. MUFG’s projection of a 6.60% yield by March and 6.75% by year-end indicates a tightening sentiment that traders need to watch closely. With the RBI expected to maintain the repo rate at 5.25%, the market’s focus will shift to global factors influencing the USD/INR pair. This could mean that while local yields are rising, the currency’s movement may be more about international sentiment, especially with ongoing liquidity injections via bonds and FX swaps. Traders should keep an eye on how these factors interplay, particularly if global risk appetite shifts. If yields climb as expected, it might attract foreign investments, potentially strengthening the rupee against the dollar. However, there’s a flip side: if global conditions worsen or if the Fed signals a more aggressive stance, the USD could gain traction regardless of local yield increases. Watch for the USD/INR to react around key levels, particularly if it approaches recent highs. A break above those could signal a stronger dollar despite rising Indian yields. 📮 Takeaway Monitor the USD/INR closely as rising yields could attract foreign investment, but global factors will play a crucial role in its movement.