CHENNAI: US Federal Reserve Chair Jerome Powell hinted at the possibility of interest rate cuts during his Jackson Hole speech, saying the central bank may need to ease policy as the job market softens and tariff-related inflation risks persist. While he did not commit to a timeline, markets quickly raised the chances of a September cut. US bond yields fell, and the dollar weakened into Friday’s close.
Market analysts say that the Indian rupee is likely to open stronger on Monday as the softer dollar and lower US yields generally support emerging market currencies.
On Friday, the USD/INR pair closed around 87.2–87.4. Immediate support lies near 87.00–86.90, while resistance stands at 87.50–87.70, they say.
The Reserve Bank of India is expected to manage volatility but not allow sharp moves. This means the rupee may firm modestly but large intraday gains are less likely.
However the scenario could change if any global risk-off news or a rebound in the dollar. These could push USD/INR back toward 87.50–87.70.
Similarly, Indian government bonds are expected to open firm on Monday, tracking the fall in US Treasury yields.
The benchmark 10-year G-Sec, which closed around 6.55% on Friday, could ease by 3–6 basis points in early trading and test levels near 6.50%.
The shorter and mid-term bonds may see stronger demand as global yields flatten, but the long end of the curve remains sensitive to India’s fiscal position and borrowing requirements.
State development loans (SDLs) and PSU bonds may also gain, but their performance will lag government securities until there is more clarity on supply.
Key Risks to Watch
According to market analysts, if other Fed officials push back against Powell’s dovish tone, US yields and the dollar could bounce back quickly.
Rising crude oil prices or fresh tariff-related news could also weigh on the rupee and limit bond gains.
Any signal of higher government borrowing could cap the bond rally, especially in the long end of the curve.
Outlook for Monday
Rupee: Slightly firmer bias; range 86.90–87.50 with RBI likely smoothing large swings.
10-year bond: Expected range 6.49%–6.56% with a bias toward testing 6.50%.
Overall, Powell’s signal of possible Fed rate cuts creates a supportive backdrop for the Indian rupee and bonds at the start of the week, though local supply pressures and global headlines could shape intraday moves.