Market News

The rupee is expected to trade steadily this week as interventions by the Reserve Bank of India could reduce traders' appetite to bet against the currency. Despite uncertainty surrounding the U.S.-Iran conflict and volatility in crude oil prices, the rupee recorded only a marginal weekly loss, ending at 95.4250 per U.S. dollar.

Traders expect the rupee to remain within a 95.00-95.50 range this week. Foreign portfolio flows, hedging activity and demand for foreign-exchange deposits are expected to influence trading.

RBI Foreign-Exchange Measures

The Reserve Bank of India announced that it would close a discounted foreign-exchange swap facility for banks to hedge overseas deposits one month earlier than planned.

RBI policy measures, including the FX deposit swap facility, have attracted nearly $57 billion. Some traders expect overseas clients to accelerate FX deposit bookings before the facility closes on August 31.

Interest-Rate Outlook

Markets are awaiting the minutes of the RBI's August policy meeting, at which interest rates were left unchanged.

Most analysts expect the RBI either to begin a shallow rate-hiking cycle in December or to keep rates unchanged throughout 2026.

Bond Market Outlook

Indian government bonds are expected to remain range-bound, with the benchmark 10-year bond yield centred around 6.75%.

The 10-year yield ended Friday at 6.7578%, after falling seven basis points in the previous week. Traders expect the yield to trade between 6.72% and 6.80%, with the RBI policy minutes due on Thursday likely to provide the next major direction.

Inflation Forecasts

At its latest policy meeting, the RBI reduced its forecast for core inflation by 40 basis points to 4.3% for the current fiscal year. It also lowered its headline inflation forecast by 10 basis points to 5.0% and indicated that it would provide sufficient liquidity.