THE WEEK WAS ABOUT TARIFFS AND GDP SURPRISE
On Wednesday, the 50% tariffs on Indian exports to the US became effective. This is likely to impact exports to the tune of nearly $50 billion, especially in segments like textiles, gems & jewellery, handicrafts, chemicals, and shrimps. The impact on jobs and NPAs will be big.
However, the week closed with positive news on the GDP front, growing at 7.8% for Q1FY26. That is nearly 130 bps better than expected. While manufacturing and construction were robust; the big alpha in the quarter came from the services (tertiary) sector.
The table captures US 10-year benchmark bond yields over the last 5 trading sessions.
| Date | Price (%) | Open (%) | High (%) | Low (%) |
| Aug 29, 2025 | 4.226 | 4.209 | 4.242 | 4.207 |
| Aug 28, 2025 | 4.207 | 4.234 | 4.250 | 4.203 |
| Aug 27, 2025 | 4.238 | 4.269 | 4.291 | 4.232 |
| Aug 26, 2025 | 4.256 | 4.273 | 4.312 | 4.252 |
| Aug 25, 2025 | 4.275 | 4.265 | 4.294 | 4.263 |
| Aug 22, 2025 | 4.258 | 4.328 | 4.339 | 4.242 |
Data Source: Bloomberg
The US bond yields, this week, were in a limited range. While the street is bending towards a rate cut of 25 bps in September, the PCE (headline and core) inflation were elevated. GDP was also robust, improving the Q2 second estimate to 3.3%. Last week, US 10-year bond yields touched a high of 4.312% and a low of 4.203%.
Here is the US dollar index (DXY), an index of dollar strength, over last 5 trading sessions.
| Date | Price (%) | Open (%) | High (%) | Low (%) |
| Aug 29, 2025 | 97.77 | 97.87 | 98.13 | 97.69 |
| Aug 28, 2025 | 97.81 | 98.12 | 98.23 | 97.74 |
| Aug 27, 2025 | 98.23 | 98.25 | 98.73 | 98.15 |
| Aug 26, 2025 | 98.22 | 98.47 | 98.56 | 98.08 |
| Aug 25, 2025 | 98.43 | 97.72 | 98.54 | 97.71 |
| Aug 22, 2025 | 97.72 | 98.60 | 98.83 | 97.56 |
Data Source: Bloomberg
The US dollar index (DXY) rallied above 98 during the week, but tapered and closed flat. For the week, the dollar index retreated after the reciprocal tariffs on India became effective. The US dollar index (DXY) touched a high of 98.73 and a low of 97.69 this week. The 100 level look a long-way off now.
The table below captures 10-year India bond yields for the last 5 trading sessions.
| Date | Price (%) | Open (%) | High (%) | Low (%) |
| Aug 29, 2025 | 6.588 | 6.553 | 6.615 | 6.536 |
| Aug 28, 2025 | 6.538 | 6.600 | 6.620 | 6.537 |
| Aug 27, 2025 | 6.600 | 6.600 | 6.600 | 6.600 |
| Aug 26, 2025 | 6.617 | 6.601 | 6.650 | 6.593 |
| Aug 25, 2025 | 6.592 | 6.551 | 6.600 | 6.543 |
| Aug 22, 2025 | 6.549 | 6.529 | 6.561 | 6.529 |
Data Source: RBI
India bond yields closed higher at 6.588% for the week after the tariffs raised the bogey of imported inflation coming into India. Last week, India 10-year bond yields touched a high of 6.650% and low of 6.536%. For the month of August, the 10-year bond yields rallied by around 30 bps.
The table captures the official USDINR exchange rate for last 5 trading sessions.
| Date | Price (₹/$) | Open (₹/$) | High (₹/$) | Low (₹/$) |
| Aug 29, 2025 | 88.174 | 87.591 | 88.313 | 87.575 |
| Aug 28, 2025 | 87.591 | 87.659 | 87.696 | 87.520 |
| Aug 27, 2025 | 87.661 | 87.674 | 87.883 | 87.607 |
| Aug 26, 2025 | 87.635 | 87.623 | 87.805 | 87.582 |
| Aug 25, 2025 | 87.608 | 87.310 | 87.623 | 87.274 |
| Aug 22, 2025 | 87.331 | 87.266 | 87.551 | 87.179 |
Data Source: RBI
USDINR weakened sharply from ₹87.331/$ to ₹88.174/$, despite flat dollar index and flat crude prices. The dollar weakness intensified post-tariff imposition, as banks rushed to buy forward cover on the dollar. Dollar demand from importers continues. Last week, USDINR touched a high of ₹87.274/$ and a low of ͅ₹88.313/$.
The table captures the Brent Crude prices over last 5 trading sessions.
| Date | Price ($/bbl) | Open ($/bbl) | High ($/bbl) | Low ($/bbl) |
| Aug 29, 2025 | 67.48 | 67.59 | 67.94 | 67.29 |
| Aug 28, 2025 | 67.98 | 67.15 | 68.06 | 66.81 |
| Aug 27, 2025 | 67.44 | 66.85 | 67.51 | 66.37 |
| Aug 26, 2025 | 66.70 | 68.14 | 68.16 | 66.60 |
| Aug 25, 2025 | 68.22 | 67.39 | 68.49 | 67.04 |
| Aug 22, 2025 | 67.22 | 67.05 | 67.45 | 66.89 |
Data Source: Bloomberg
With Trump going aggressive on Russian oil, there are fears that oil shortfall may eventually prevail. However, at a macro level, there still are demand concerns around oil. Last week, Brent Crude touched a high of $68.49/bbl and a low of $66.37/bbl. For now, demand remains the bigger concern for oil prices.
The table captures the international spot prices of gold in dollars per troy ounce (oz).
| Date | Price ($/oz) | Open ($/oz) | High ($/oz) | Low ($/oz) |
| Aug 29, 2025 | 3,448.00 | 3,418.20 | 3,454.08 | 3,404.29 |
| Aug 28, 2025 | 3,417.20 | 3,394.18 | 3,423.36 | 3,384.46 |
| Aug 27, 2025 | 3,397.42 | 3,392.88 | 3,398.94 | 3,373.76 |
| Aug 26, 2025 | 3,392.88 | 3,366.78 | 3,394.33 | 3,351.26 |
| Aug 25, 2025 | 3,366.79 | 3,371.23 | 3,376.47 | 3,359.69 |
| Aug 24, 2025 | 3,369.16 | 3,368.75 | 3,371.05 | 3,366.06 |
| Aug 22, 2025 | 3,372.11 | 3,338.76 | 3,379.01 | 3,321.49 |
Data Source: Bloomberg
Spot gold prices closed higher at $3,448/oz as global macro risks have risen with changing equations. The gold/silver ratio is favouring silver, but safe haven demand favours gold. During the week, gold touched a high of $3,454.08/oz and a low of $3,351.26/oz.
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