Rupee Likely to Stay Range-Bound as India Eyes Trade Deals with U.S.; Bond Yields Watch Global Cues
MUMBAI, July 7 — All eyes are on the July 9 deadline as India and the United States push forward with key trade negotiations, a development that could mildly support the Indian rupee in the near term.
The rupee ended the past week at 85.3925 against the dollar, showing minimal movement. While a finalized trade agreement with the U.S. would be viewed positively, analysts believe it may not trigger a sharp rally.
“A successful deal might give the rupee some upward momentum, but the RBI would likely step in to avoid excessive appreciation,” said Anil Bhansali, Treasury Head at Finrex Treasury Advisor, noting resistance at around 85.
Despite trade uncertainties, implied volatility for the rupee remains subdued, suggesting expectations of a stable currency in the immediate term.
Adding to the optimism, India’s foreign exchange reserves rose to $702.8 billion as of June 27—just shy of an all-time record.
The U.S. dollar, meanwhile, continues its downward trend, impacted by shifting expectations around Federal Reserve rate cuts. This week’s focus will also include key U.S. data points—consumer inflation figures on Tuesday and retail sales on Thursday.
Back home, India’s benchmark 10-year bond yield (6.33% 2035) closed at 6.2947%, largely unchanged. Market watchers predict movement between 6.28% and 6.33% in the coming days, tracking cues from U.S. Treasury yields.
Parijat Agrawal, Fixed Income Head at Union Asset Management, noted, “While global tariffs and geopolitical risks remain, the current inflation trend may allow space for monetary easing.”
Adding further weight, June’s strong U.S. jobs report has dimmed hopes for a Fed rate cut before September.
Investors are also keeping tabs on continued foreign inflows into Indian government bonds, with over $1 billion added last week. The RBI’s conservative stance on liquidity withdrawal—despite surplus liquidity at a three-year high—suggests overnight lending rates will remain between the repo rate and its floor, ensuring smoother policy transmission.
