India's benchmark 10-year bond yield holds at 7.05% as the rupee strengthens, aided by a dip in global oil prices and record offshore inflows. Investors are now focusing on the Reserve Bank of India's October policy meeting, where potential rate hikes are being anticipated to support the local currency.
India's benchmark 10-year bond yield opened at 7.0498% on September 22, remaining steady from the previous session. This stability comes as global crude oil prices retreated from recent highs, offering relief to the Indian economy, which relies heavily on energy imports. Brent crude moved lower as traders monitored diplomatic developments between the United States and Iran, and as supply concerns eased due to steady transit volumes through the Strait of Hormuz.
The Indian rupee strengthened by 6 paise against the US dollar, supported by the decline in oil prices and a softening in US Treasury yields. The currency has also found backing from data reporting a record $133 billion influx in offshore banking deposits. For those monitoring the currency, the dollar-rupee exchange rate faces resistance in the 96.00 to 96.10 range, while support is currently positioned near 95.50. Analysts suggest that if the pair consistently trades below 95.70, it could test the 95.00 level.
Investors are now turning their attention to the Reserve Bank of India's (RBI) upcoming policy review in October. Expectations for a rate hike have increased as global central banks continue their tightening cycles. According to the CME FedWatch tool, the probability of a US interest rate hike in October has climbed to 56%, a sharp rise from 43.5% just a week ago. Financial analysts at Natixis anticipate that the RBI may adopt a stricter policy, potentially implementing up to 50 basis points in rate hikes by the end of 2026 to provide structural support for the rupee. The primary monitorable for investors remains the RBI's stance on inflation and currency stability during the next policy meeting.