ADVERTISEMENTs
_page-0001.jpg)
-10”-x-5.jpg)
Rupee outlook hinges on US tariffs, RBI action; bonds to track inflation data
The sixth round of tariff negotiations between India and the United States are scheduled for Aug. 25.
-
Reuters - Sun, 10, Aug 2025
- 23:36 EDT
- 18
File photo of the rupee logo. / REUTERS/Francis Mascarenhas
The Indian rupee's trajectory will depend on developments around U.S. tariffs and the Reserve Bank of India's response if the currency comes under renewed pressure, while government bonds will track inflation data from both India and the United States.
The rupee weakened by 0.1 percent last week to 87.66, following a 1 percent drop the week before, after U.S. President Donald Trump imposed additional tariffs on Indian goods, placing India among the countries subject to the highest U.S. import duties.
High tariffs increase downside risks to India's economic growth, Morgan Stanley said in a note last week. The brokerage said it is monitoring developments in trade negotiations and high-frequency growth indicators.
ALSO READ: Tariff boomerang: U.S. move against India may cost Americans more
The sixth round of negotiations between India and the United States are scheduled for Aug. 25.
The rupee's decline over the past fortnight would likely have been steeper if not for the RBI's intervention. The central bank has been staunchly defending the rupee's all-time low level of 87.95 against the dollar.
"We wait to watch how long the RBI protects that level," Anil Bhansali, head of treasury at Finrex Treasury Advisors, said.
The July U.S. inflation data, due on Aug. 12, could influence the Federal Reserve's rate-cut expectations and the broader dollar sentiment.
Meanwhile, India's 10-year benchmark 6.33 percent 2035 bond yield settled at 6.4121 percent last week, up 4 basis points over the week, which saw volatile moves on both directions.
Traders anticipate the yield will remain in the 6.33 percent to 6.43 percent band during the holiday-truncated week, with focus on U.S. inflation as well as local retail inflation also due on Aug. 12.
The 10-year benchmark bond yield saw sharp volatile moves, after expectations of dovishness met with the RBI leaving its key policy rate unchanged.
Additionally, the RBI maintained its growth forecast, with Governor Sanjay Malhotra noting that although inflation is currently well below expectations, it is set to rise by the end of the year.
The market is now divided, with several analysts saying that there may be no more rate cuts, while some expect growth and inflation to undershoot forecasts, which will open the door for at least one more rate cut.
"We feel the hawkish tone of policy may create volatility in markets in the near term," said Amit Somani, deputy head of fixed income, Tata Asset Management.
"However, a firm eye on inflation should provide comfort to markets in the longer term. We feel the RBI policy framework will continue to remain supportive of growth, even as the threshold for further policy cuts is high."
Related
.jpg)
.jpg)
.jpg)
.jpg)
.jpg)
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT
E Paper
ADVERTISEMENT
.jpg)
Video
Comments
Start the conversation
Become a member of New India Abroad to start commenting.
Sign Up Now
Already have an account? Login