• Indian rupee hovers near all-time low ahead of RBI’s policy review, with expectations of a 25-bps rate cut.
• Strong GDP growth of 8.2% in Q2 could influence rupee stability and bond yields.
• Traders advise exporters and importers to hedge strategically as portfolio inflows may affect currency movements.

The Indian rupee and government bond markets are under the spotlight as traders await the Reserve Bank of India’s (RBI) monetary policy decision this week. The rupee closed at 89.4575 on Friday, inching close to its all-time low of 89.49, amid persistent pressure despite central bank interventions in the forex market.

India’s economy posted 8.2 percent year-on-year growth in July-September, up from 7.8 percent in the previous quarter, providing some optimism for currency stability. Analysts note that increased portfolio inflows could help the rupee recover toward 89, though a sustained rebound appears unlikely.

In the bond market, the 10-year benchmark 6.33 percent 2035 bond yield settled at 6.5463 percent , with traders expecting it to trade between 6.51 percent  and 6.58 percent  until the policy announcement. A majority of economists forecast a 25-basis point rate cut by the RBI on December 5, with rates likely to remain steady through 2026.

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Treasury experts advise exporters to continue selling dollars while hedging 20 percent-30 percent  of their receivables, while importers could capitalize on dips in USD/INR. The RBI has already increased its short dollar positions to $63.6 billion, reinforcing efforts to manage currency volatility.

Economists like Radhika Rao of DBS Bank note that the RBI’s rate review faces a delicate balance, strong economic growth coupled with record-low inflation may support a gradual easing, while maintaining a healthy real rate buffer. Forward-looking guidance is expected to guide markets post-decision.