Rupee Hits New Low Against US Dollar; India's 10-Year Bond Yield Surpasses 7% Threshold

Market Update: Indian Rupee Weakens to 95.2 per Dollar

The Indian rupee has depreciated to a record low of 95.2 per dollar on March 30, down 0.3% from the previous day. This marks the first time the rupee has breached the 95 per dollar mark. The currency has weakened by 4.4% against the US dollar in the March quarter.

Market Volatility Expected

The Reserve Bank of India (RBI) has tightened limits on lenders' net open foreign exchange positions, effective from April 10. The new rules require banks to ensure that their net open rupee positions in the onshore deliverable market do not exceed $100 million at the end of each business day. This move is expected to lead to a volatile week in the Indian foreign exchange market.

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Bond Yields Rise

India's 10-year benchmark bond yield has risen to 7.0121%, the highest level since July 5, 2024. This marks the first time the 10-year yield has crossed the 7% handle in over 21 months. The 10-year 6.48% 2035 bond yield has also risen to a record high.

Economic Outlook

The Indian rupee is on course to log its steepest fiscal year drop since 2011-12, due to concerns over elevated oil prices, global trade frictions, geopolitical tensions, and persistent capital outflows. The rupee's depreciation has raised risks for India's inflation and growth outlook.

Read also: US-Iran Tensions Spark Uptick in Oil Prices Amid Global Market Decline

Market Performance

The Indian stocks are on course for their worst monthly drop since March 2020, while bonds are on track for their worst fiscal year since 2023. India's fiscal year runs from April to March.