The domestic unit ended Friday at 89.98 per U.S. dollar, after touching a record low of 90.42 earlier in the week. It weakened 0.6% over the five-day period, extending concerns that the currency may struggle to find direction until progress is made in ongoing U.S.–India trade negotiations. Analysts at ANZ warned that the rupee could experience further calibrated declines if elevated U.S. tariffs remain in place.
Interestingly, the Reserve Bank of India made no mention of the rupee’s slide during its policy announcement on Friday, when it cut benchmark rates by 25 basis points. According to ANZ, that silence signals a degree of comfort at the central bank, particularly at a time when capital inflows have largely dried up.
Traders currently expect the currency to oscillate within a 89.80–90.50 range this week.
Markets Look to the Fed
The Federal Reserve’s policy meeting is set to take center stage, with widely held expectations of a 25-bps rate cut on Wednesday. Beyond the headline decision, investors will closely track the Fed’s forward guidance for 2026. Meanwhile, the dollar index recorded its second straight weekly decline, providing some respite for emerging-market currencies.
Bond Market Steady Ahead of RBI Liquidity Moves
India’s bond market remained firm last week. The benchmark 6.33% 2035 yield closed at 6.5166%, down three basis points, while the 6.48% 2035 yield settled at 6.4944%. Traders anticipate yields to drift between 6.45% and 6.54%, with the more decisive moves expected after the Fed meeting and the RBI’s scheduled open-market operations.
Alongside the rate cut, the RBI unveiled plans to inject roughly 1.45 trillion rupees ($16.12 billion) in liquidity through bond purchases and a dollar/rupee buy-sell swap over the next two weeks. The measures, analysts say, should provide a stabilizing cushion at a time of global uncertainty. Niraj Kumar, CIO at Generali Central Life Insurance, noted that the policy stance “supports sovereign bond demand and provides a strong anchor for domestic markets.”
Foreign investor activity will also remain in focus after overseas funds turned sellers of Indian bonds last week. Some analysts believe further policy support may be necessary next year to avoid a sharp economic slowdown, leaving room for additional RBI rate cuts. Matthew Kok of Eastspring Investments said more proactive measures may be needed as growth risks build.
Key Data and Events to Watch
- India November CPI inflation – Dec 12, Friday, 4:00 p.m. IST (Reuters poll: 0.65%)
- U.S. Federal Reserve monetary policy decision – Dec 11, Thursday, 12:30 a.m. IST
- India September international trade data – Dec 11, Thursday, 7:00 p.m. IST
- U.S. initial jobless claims (week ending Dec 6) – Dec 11, Thursday, 7:00 p.m. IST
With major global and domestic policy signals on deck, traders expect currency and bond markets to remain cautious, if not slightly defensive, as the rupee navigates yet another week under pressure.