Indian Rupee Eyes Trade Tensions, RBI Rate Decision Amid Market Volatility

The Indian rupee is set to follow the dollar and Chinese yuan this week as global trade tensions escalate. It ended at 85.2350 against the U.S. dollar on Friday, marking a 0.3% weekly gain—its third straight rise—supported by a broadly weaker greenback amid U.S. growth slowdown concerns.

However, the dollar regained some ground on Friday after Fed Chair Jerome Powell hinted at a cautious stance on rate cuts, and U.S. job data exceeded expectations. Currency markets now shift focus to recent tariff escalations, with China imposing a 34% levy on all U.S. imports. Analysts expect the rupee to trade between 84.70 and 85.70 in the near term.

All eyes are on the Reserve Bank of India’s monetary policy decision on April 9, with markets widely expecting a 25 basis point rate cut to 6.00%. The move could signal a shift to an accommodative stance as global trade friction threatens economic growth. February’s industrial production data, due Friday, will also be monitored for signs of economic resilience.

Meanwhile, the benchmark 10-year Indian bond yield dropped to 6.4630%, down 12 basis points—the largest weekly fall in over a year. The decline followed expectations of aggressive RBI easing and a new open market operation (OMO) plan aimed at ensuring surplus liquidity. Yields are expected to remain within 6.42%-6.50% until the RBI decision.

U.S. March CPI data, also due this week, could influence global markets as investors assess inflation trends amid trade uncertainties.

DBS Bank’s Radhika Rao expects the RBI to cut rates and shift its stance to support liquidity, leveraging the real rate cushion to aid transmission. Markets are closely watching policy cues and economic data to gauge the rupee’s next move.