Introduction to the Indian Rupee’s Depreciation
The Indian rupee is expected to face further depreciation pressure due to the absence of firm central bank intervention. This comes after the rupee slumped to a record low of 89.49 per dollar, down 0.8% for the week. The decline was sparked by 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.
Factors Contributing to the Rupee’s Decline
A hit to trade and portfolio flows, sparked by U.S. tariffs, has exerted pressure on the rupee. Traders and analysts note that the conclusion of a trade deal could help the currency rebound. The rupee has declined 4.5% over 2025, consistently lagging its regional peers this year, despite India’s economic fundamentals remaining resilient and the stock market hovering near all-time peaks.
Expected Movement of the Rupee
Going forward, the rupee is expected to settle in a new range of 88.80-90.00. This is based on the expectation that the rupee will deliberate in a gradual, staircase-like manner. 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.
Impact on Bond Yields
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.
Upcoming Economic Events
Several key economic events are scheduled to take place in the coming week. These include the release of India’s October fiscal deficit, October industrial output, and July-September GDP growth data. In the U.S., events include the release of October PPI manufacturing, October retail sales, and November consumer confidence.
Monetary Policy Decision
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. Deutsche Bank expects the RBI to deliver a 25-bp repo rate cut in the December policy, based on its forecast of FY27 growth, inflation, and real rates.
Conclusion
In conclusion, the Indian rupee is expected to face further depreciation pressure due to the absence of firm central bank intervention. The currency’s decline has been sparked by a combination of factors, including portfolio outflows, uncertainty over a U.S.-India trade deal, and a pullback in the central bank’s defense of a key level. The RBI’s monetary policy decision and upcoming economic events will be closely watched by traders and investors, as they seek to gauge the outlook for the rupee and the Indian economy.
