Indian Rupee Eyes RBI Support Amid Renewed U.S.-China Trade Tensions

The Indian rupee is expected to react cautiously this week as renewed U.S.-China trade tensions weigh on global risk sentiment. The currency, which closed at 88.6850 per dollar on Friday, gained 0.1% over the week after the Reserve Bank of India (RBI) stepped in to prevent it from breaching its all-time low of 88.80. The RBI’s steady interventions continue to stabilize the rupee, even as downside pressure persists due to weak portfolio inflows and external headwinds.

Global markets were rattled after U.S. President Donald Trump reignited the trade war with China, announcing a 100% tariff on Chinese exports and new export controls on critical software starting November 1. The dollar index slipped 0.5% on Friday but still ended the week 1% higher, reflecting cautious optimism among investors.

Market experts expect the rupee to remain under mild depreciation pressure unless supported by strong portfolio inflows or positive trade discussions between India and the U.S. According to IFA Global, importers should buy on dips while exporters are encouraged to hedge gradually, as rupee weakness is expected to unfold in a controlled manner.

In the bond market, India’s 10-year benchmark yield on the 6.33% 2035 bond edged up to 6.5370%, influenced by mixed investor demand and anticipation ahead of key inflation data. The September CPI, expected at 1.70% per Reuters’ poll, could push yields lower if it undershoots estimates. States are set to borrow ₹2.82 trillion in Q4 FY2024, easing supply concerns.

Economists expect inflation to remain below 2%, providing room for the RBI to cut rates in December, with another potential reduction in February. DBS Bank’s Radhika Rao forecasts the 10-year yield could trend toward 6.40%, supported by dovish policy sentiment and lower inflation readings.