Indian rupee shored up by RBI intervention, swaps cushion liquidity as bonds sell off

MUMBAI: The Indian rupee logged its best single-day gain in over a month on Monday, boosted by likely dollar sales by the central bank and modest inflows that dulled the spillover from global market volatility.

The central bank complemented its interventions with dollar-Indian rupee buy/sell swaps, which, traders said, were intended to offset the liquidity impact of its spot dollar sales.

The liquidity impact of FX interventions has remained in focus due to their effect on money market interest rates as worries over hefty government borrowing have kept government bond yields elevated.

On Monday, the Indian rupee rose 0.5% to end the session at 91.5125 per dollar, its best one day gain since December 19. The yield on the 10-year benchmark bond rose as much as 8 basis points to 6.77%, the highest since March 2025.

In domestic equity markets, the benchmark BSE Sensex and Nifty 50 rose a little over 1% each, clawing back some of their losses from Sunday’s special trading session, when the federal budget underwhelmed investors.

“The budget felt more like continuity than a surprise. It broadly met expectations but didn’t introduce a new catalyst that would materially change the foreign flows narrative, particularly at a time when emerging market (EM) inflows remain selective,” said Marc Velan, head of investments at Lucerne Asset Management in Singapore.

Foreign investors net sold $4 billion of Indian stocks in January, with persistent selling weighing on the Indian rupee.

Global markets, meanwhile, were rocked by a continued selloff in precious metals on Monday, forcing investors to ditch other assets to cover losses.

MSCI’s gauge of Asian shares outside of Japan fell over 2%, while futures pointed to a rough start for stocks on Wall Street as well.