Indian rupee to remain on defensive, bonds to react to supply pressure

MUMBAI: The Indian rupee is likely to stay on the defensive this week as traders gauge whether it can hold above the 91-per-dollar mark, while bond yields will contend with supply pressure, with an eye on any support from the government or central bank.

The rupee closed at 90.6350 on Friday, little changed week-on-week.

Traders and analysts say although incessant pressure on the currency has eased, importer hedging, weakness in local stocks and intermittent dollar demand due to maturities in non-deliverable forwards remain sore spots.

Foreign investors net sold about $800 million worth of local stocks on Friday, per provisional exchange data.

A rise above 90.75 can see the dollar-rupee pair moving back to 91.00 levels while support remains around 90.05, although dollar demand is expected to persist at every decline, said Anil Bhansali, head of treasury at Finrex Treasury Advisors.

Its key to watch whether the central bank persists with its defense and if that also encourages exporters to become more active, traders said.

Meanwhile, data released on Friday showed that consumer prices in the US rose less than expected, helping bolster wagers on at least two rate cuts by the Federal Reserve this year.

Geopolitical developments relating to U.S.-Iran negotiations will also be in focus this week. Reuters reported that the U.S. military is preparing for the possibility of sustained, weeks-long operations against Iran if President Donald Trump orders an attack.

Bonds

The 10-year benchmark 6.48% 2035 yield settled at 6.6799% on Friday, down 6 basis points for the week, after rising in consecutive weeks.

Traders expect the yield to move in a 6.65%–6.76% range this week, with bias tilted towards the upside if there is no action to provide support.

Bond yields dipped last week amid some improvement in demand and a debt switch with the RBI that reduced some pressure from planned gross borrowing for the next financial year.

Market participants say that more support is needed though, particularly via bond purchases if yields are to cool significantly.

Even after the switch, next year’s gross borrowing remains elevated at a record 16.45 trillion rupees.

Meanwhile, RBI Governor Sanjay Malhotra earlier this month said the focus on the size of gross borrowing could be misleading and net borrowing provides a more accurate assessment.

Meanwhile Nomura analysts, who have consistently held one of the more dovish outlooks for RBI monetary policy, reversed their call for an April rate cut to prolonged pause.

“With December 2025 likely marking the end of the RBI’s rate‑easing cycle, the bar for additional cuts remains high,” said Abhishek Bisen, fixed income head at Kotak Mutual Fund.