As the Indian rupee traders gear up for a shortened trading week, all eyes are on the Reserve Bank of India as it continues to show robust support for the currency. With local holidays taking place on Tuesday and Wednesday, market participants are eagerly awaiting updates on trade negotiations with the U.S. and potential policy announcements.
Last week, the RBI's unexpected surge in dollar sales propelled the rupee to its strongest weekly performance in nearly four months. This boost was further reinforced by U.S. President Donald Trump's remarks claiming that Indian Prime Minister Narendra Modi had agreed to cease importing Russian crude oil. However, the Indian government has yet to confirm this statement.
The ongoing purchase of discounted Russian oil has been a sticking point in U.S.-India relations, resulting in high tariffs on Indian exports. A positive turn in the trade talks could provide additional support to the rupee, according to Kunal Kurani, assistant vice president at FX advisory firm Mecklai Financial.
On the other hand, the 10-year benchmark bond yield in India closed at 6.5131% last Friday, down 3 basis points from the previous week. Traders are expecting yields to remain within the 6.47% to 6.53% range in the coming days, with minimal market-moving events in sight.
The recent minutes from the RBI's policy meeting revealed a dovish stance among the committee members, hinting at potential rate cuts in the future due to easing inflation. RBI Governor Sanjay Malhotra highlighted the scope for further policy support to bolster economic growth.
Abhishek Bisen, head of fixed income at Kotak Mahindra Mutual Fund, suggested that investors consider longer-dated government bonds or actively managed long-duration funds amid the declining interest rate environment. The majority of market participants are now anticipating a rate cut in December, with forecasts of another reduction in February by firms like Nomura, Capital Economics, and MUFG.
Looking ahead, key upcoming events include the release of India's October HSBC manufacturing, services, and composite Flash PMI on Friday morning. Additionally, investors will be monitoring U.S. data such as September existing home sales and consumer price inflation reports on Thursday and Friday, respectively.
Overall, the week ahead promises to be dynamic for Indian markets, with currency traders and bond investors closely watching developments on both the domestic and international fronts.
