Indian rupee at risk of steeper losses, bonds to react to liquidity and growth data
The Indian rupee is likely to face further depreciation pressure this week, with traders eyeing a move toward 90 per U.S. dollar in the absence of firm central bank intervention, while bond yields will track liquidity movements and local growth data.
The rupee slumped to a record low of 89.49 per dollar on Friday, down 0.8% for the week.
A bout of portfolio outflows, uncertainty over a U.S.-India trade deal, and a pullback in the central bank's defense of a key level sparked the slide in the rupee, traders said.
The move "caught the market on the wrong side" and the pressure is expected to persist next week, a trader at a large private bank said.
The rupee has declined 4.5% over 2025, consistently lagging its regional peers this year, even as India's economic fundamentals remain resilient and the stock market hovers near all-time peaks.
A hit to trade and portfolio flows, sparked by U.S. tariffs, has exerted pressure on the rupee, traders and analysts said, noting that the conclusion of a trade deal could help the currency rebound.
"Going forward, we expect the rupee to settle in a new 88.80-90.00 range. We have maintained that the rupee will deliberate in a gradual, staircase-like manner," said Abhishek Goenka, CEO at forex advisory firm IFA Global.
The dollar index gained last week, even as markets reloaded wagers that the Federal Reserve would cut interest rates next month after dovish remarks from New York Fed President John Williams.
In India, the 10-year benchmark 6.33% 2035 bond yield settled at 6.5665% on Friday.
Traders expect the yield to stay between 6.52% and 6.60% this week, with the focus on the Reserve Bank of India's liquidity moves as well as growth data.
The RBI net bought bonds worth 148.10 billion rupees ($1.65 billion) in the week ended November 14, after purchasing bonds worth 124.70 billion rupees in the previous week, its first such buy in almost six months.
However, the purchases were frontloaded, leading to market speculation that the buying was just replacement demand instead of a yield signal.
Meanwhile, the RBI's monetary policy decision is due on December 5 amid uncertainty over whether the central bank will cut rates or maintain the status quo.
"We expect the RBI to deliver a 25-bp repo rate cut in the December policy. Based on our forecast of FY27 growth, inflation, and real rates, a simple Taylor Rule formula indicates that the terminal repo rate should fall to 5.25%," Deutsche Bank Chief India Economist Kaushik Das said.
Deutsche Bank expects India's GDP to have grown 7.7% in the July-September quarter, largely in line with the 7.8% expansion in April-June.
KEY EVENTS:
India ** October fiscal deficit - November 28 , Friday (3:30 p.m. IST)
** October industrial output - November 28, Friday (4:00 p.m. IST)
** July-September GDP growth data - November 28, Friday (4:00 p.m. IST)(Reuters poll - 7.1%) U.S.
** October PPI manufacturing - November 25, Tuesday (7:00 p.m. IST) ** October retail sales - November 25, Tuesday (7:00 p.m. IST)
** November consumer confidence - November 25, Tuesday (8:30 p.m. IST)
** September durable goods - November 26, Wednesday (7:00 p.m. IST)
** Initial weekly jobless claims for week to November 17 - November 26, Wednesday (7:00 p.m. IST)
** September new homes sales units - November 26, Wednesday (8:30 p.m. IST)
($1 = 89.5800 Indian rupees)
