What is the story about?
India’s currency and debt markets remain shut on Wednesday (April 1) for a local holiday, even as pressure on the rupee and bond yields persists amid global volatility.
Trading in the foreign exchange and government securities segments will resume on Thursday, April 2, while equity markets continue to function.
The rupee has come under sustained stress in recent sessions, ending Monday (March 30) at a record closing low of 94.83 against the US dollar. The decline reflects a broader risk-off sentiment across emerging markets, triggered by escalating tensions in West Asia and firm crude oil prices.
Intraday volatility has intensified. On Monday (March 30), the domestic currency briefly breached the 95-per-dollar mark, hitting an all-time low of 95.22 before recovering to settle near 94.70 levels.
The session saw wide swings of over 160 paise, underscoring heightened uncertainty in currency markets.
Market participants attribute the weakness to a stronger dollar and elevated energy prices. Safe-haven demand has kept the dollar index above the 100 mark, while Brent crude prices have surged amid fears of supply disruptions, adding pressure on oil-importing economies such as India.
The Reserve Bank of India recently capped banks’ net open positions at $100 million to curb speculative activity, a move that initially helped the rupee strengthen before volatility resurfaced. The central bank has mandated compliance by April 10.
A research report by State Bank of India has suggested more active intervention, arguing that India’s foreign exchange reserves—estimated at over $700 billion and covering more than 10 months of imports—provide sufficient buffer to stabilise the currency if needed.
The report also flagged structural pressures in the forex market, including rising demand from oil marketing companies and potential capital outflows from foreign investors. It recommended creating a separate window for large oil-related dollar demand to improve market transparency and reduce volatility.
Despite the recent depreciation, the government has maintained that macroeconomic fundamentals remain intact. Officials have reiterated that the rupee is market-determined, with authorities closely monitoring developments in global and domestic markets.
Since the onset of the West Asia conflict in late February, the rupee has weakened by over 4%, reflecting external headwinds rather than domestic imbalances. However, the nearly 10% depreciation over the current financial year highlights the growing sensitivity of the currency to global shocks.
Trading in the foreign exchange and government securities segments will resume on Thursday, April 2, while equity markets continue to function.
The rupee has come under sustained stress in recent sessions, ending Monday (March 30) at a record closing low of 94.83 against the US dollar. The decline reflects a broader risk-off sentiment across emerging markets, triggered by escalating tensions in West Asia and firm crude oil prices.
Intraday volatility has intensified. On Monday (March 30), the domestic currency briefly breached the 95-per-dollar mark, hitting an all-time low of 95.22 before recovering to settle near 94.70 levels.
The session saw wide swings of over 160 paise, underscoring heightened uncertainty in currency markets.
Market participants attribute the weakness to a stronger dollar and elevated energy prices. Safe-haven demand has kept the dollar index above the 100 mark, while Brent crude prices have surged amid fears of supply disruptions, adding pressure on oil-importing economies such as India.
The Reserve Bank of India recently capped banks’ net open positions at $100 million to curb speculative activity, a move that initially helped the rupee strengthen before volatility resurfaced. The central bank has mandated compliance by April 10.
A research report by State Bank of India has suggested more active intervention, arguing that India’s foreign exchange reserves—estimated at over $700 billion and covering more than 10 months of imports—provide sufficient buffer to stabilise the currency if needed.
The report also flagged structural pressures in the forex market, including rising demand from oil marketing companies and potential capital outflows from foreign investors. It recommended creating a separate window for large oil-related dollar demand to improve market transparency and reduce volatility.
Despite the recent depreciation, the government has maintained that macroeconomic fundamentals remain intact. Officials have reiterated that the rupee is market-determined, with authorities closely monitoring developments in global and domestic markets.
Since the onset of the West Asia conflict in late February, the rupee has weakened by over 4%, reflecting external headwinds rather than domestic imbalances. However, the nearly 10% depreciation over the current financial year highlights the growing sensitivity of the currency to global shocks.
