The Indian rupee enters a critical week of trading, facing renewed depreciation pressure, with currency desks across Mumbai bracing for a potential slide toward the psychological barrier of 90 per U.S. dollar.
The bearish sentiment follows a punishing week in which the currency slumped to a record low of 89.49 on Friday, capping a 0.8% weekly decline that has left traders scrambling to adjust their positions.
Market participants describe the current environment as a “perfect storm” of headwinds. A sudden bout of portfolio outflows, exacerbated by uncertainty surrounding a pending U.S.-India trade deal and the imposition of U.S. tariffs, has sparked a hit to trade flows. Crucially, the Reserve Bank of India (RBI) appears to have pulled back its defense of key technical levels, a strategic withdrawal that one trader at a large private bank noted “caught the market on the wrong side.”
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The currency’s trajectory has been undeniably downward throughout 2025. The rupee has shed 4.5% of its value this year, consistently lagging behind its regional Asian peers despite India’s domestic economic fundamentals remaining resilient and the stock market hovering near all-time peaks. Abhishek Goenka, CEO of forex advisory firm IFA Global, predicts the volatility will continue, forecasting the rupee to settle into a new range between 88.80 and 90.00. He describes the currency’s behavior as a “gradual, staircase-like” descent.
Bond Markets and Central Bank Maneuvers
While the currency markets battle volatility, the bond market is fixated on the RBI’s liquidity management ahead of the central bank’s monetary policy decision on December 5. The benchmark 10-year bond yield settled at 6.5665% on Friday, with traders expecting it to remain rangebound between 6.52% and 6.60% this week.
Investors are closely parsing the central bank’s recent open market operations for clues on policy direction. The RBI net bought bonds worth 148.10 billion rupees ($1.65 billion) in the week ended November 14, following a purchase of 124.70 billion rupees the prior week—its first such buying spree in nearly six months. However, the “frontloaded” nature of these purchases has led to market speculation that this is merely replacement demand rather than a deliberate signal to suppress yields.
The focus now shifts to the December 5 policy meeting, where the debate over interest rates is intensifying. Deutsche Bank Chief India Economist Kaushik Das argues that the time for easing has arrived.
“We expect the RBI to deliver a 25-basis point repo rate cut in the December policy,” Das stated.
Citing the Taylor Rule—a formula used to guide central bank rates based on inflation and growth—Das noted that the terminal repo rate should theoretically fall to 5.25% based on FY27 forecasts.
The Week Ahead
The immediate direction of both the rupee and bond yields will likely be dictated by a heavy calendar of economic data. On Friday, November 28, India will release its fiscal deficit figures and industrial output data, but the headline event will be the GDP growth figures for the July-September quarter. Deutsche Bank forecasts a robust 7.7% expansion, largely keeping pace with the 7.8% growth seen in the previous quarter, while a Reuters poll pegs the number slightly lower at 7.1%.
Globally, the U.S. dollar index remains a formidable opponent, having gained last week despite markets reloading wagers on a Federal Reserve rate cut next month. Dovish remarks from New York Fed President John Williams have solidified expectations, but the greenback remains buoyed by comparative economic strength.
Traders will be watching a slew of U.S. data points that could sway the dollar and, by extension, the rupee. The schedule kicks off Tuesday, November 25, with manufacturing PPI, retail sales, and consumer confidence data. This is followed on Wednesday by durable goods orders, new home sales, and initial jobless claims, all of which will be scrutinized for signs of the economic softening required to justify the Fed’s dovish pivot.