Rupee Nears 97 as US Yields Spike, RBI Stays Cautious Amid Global Market Volatility

追加: 2026-05-20

[00:00:00]Kunal Sodhani joining in now. Once again, he's of course the head of treasury at Shinhan Bank.

[00:00:05]Kunal, good morning and thank you so much for joining us again on short notice. You know, frankly, when we were speaking on Monday and you were saying levels of 97 were possible, I really thought that's going to happen after 2-3 weeks. I thought that was a view for the next 1 month. I didn't know that we'll be back 2 days later discussing the prospects of 97 now. I mean, within the same week.

[00:00:28]What's going on? And has there been some intervention in the opening trades from the RBI?

[00:00:35]Uh so, basically, as we were expecting 97 levels definitely are almost there. Uh no, I do not see any kind of sharp intervention as we discussed even last time that RBI may look forward to calibrate this move, maybe having a smooth orderly depreciation rather than any kind of sharp appreciation by intervening sharply as we discussed that RBI itself remains net dollar short position uh which is very high at this point in time. So, I think intervention sharply may be not seen or maybe if they may wait for some kind of equilibrium where it holds and then they possibly intervene, which is possible on that front. Uh but most important thing again I would discuss is about a 10-year US treasury yields because that is still again moving higher.

[00:01:23]So, almost 4.68% currently 4.65.

[00:01:27]Uh hawkish Fed obviously seen uh pricing this yields to be moving higher, which anticipates that FPI outflows may continue. And when this outflows continues, I think pressure on rupee will prevail. Uh Brent crude prices we all discussed, I think that will still continue. And I think the geopolitical issues are don't I don't think it'll be there to be solved the very soon. You know, a lot of tweet sharing will happen. Markets will inter- interact and react. But all in all, I still believe there is still scope for further depreciation of rupee. From here, if I eye any levels, then it could be around 97.60 is what I am eyeing from here. Some measures may be thought of from the central bank and the government in order to at least smoothen this phase of depreciation.

[00:02:18]Mhm. Yeah. Uh, you know, speaking of of of the yield, the the rates even now are are, you know, very very elevated. The US 10-year at about 4.67.

[00:02:32]And the US 30-year, like we've been pointing out earlier as well in the show, yes, has gone to levels last seen in 2007.

[00:02:38]So, let's talk about these, you know, global yields, Kunal. Usually, you start feeling very eerie and scared when yields go and, you know, rise to these kind of levels.

[00:02:49]So, how should we interpret this? This is just the fear of maybe one or two rate hikes?

[00:02:55]Or could this be something more that the US bond market is indicating now?

[00:03:00]So, ideally, even if we talk about other global economies, even Japan for that matter, and other even European countries in UK, I think everywhere the yields have been spiking.

[00:03:11]Uh, which indicates that obviously rate hike may be on cards, not immediately again as as we said, but in the near term, maybe in the near 3 to 6 months, possible chances. Even if we talk about India, I mean, the way OIS has moved, the one-year OIS has rallied sharply higher. The yields are in I mean, predicting that there can be one hike maybe by this year itself, by even RBI. And considering the petrol diesel price hike, almost around 4 rupees in I mean, in totality, uh, with 3.9 paisa roughly, I think the contribution to CPI will be around maybe 16 to 20 basis from here, which again will pull the CPI higher and it's only not about oil, petrol or diesel because ancillary impact will be higher on logistics, food, many other sectors which definitely will show us that the inflation will across sectors will tend to be higher. So, I think the same scenario goes for even US.

[00:04:12]If we see the US CPI data and US PPI data, both of the data are clearly indicating that there is some further fear of rising inflation which is getting depicted in the yields. So, yes, I think yields remain the backbone for any economy. I mean, currency I would say comes second. The reaction on yields suggest a lot of things for equities and currencies as well. So, important to watch is yields. If they cool off, definitely we see some cool off in currency also.

[00:04:45]Yeah, well, that's not not happening at least anytime immediately because market continues to be very worried. Kunal, let's talk about the possible next steps from here on.

[00:04:56]As you mentioned, you're not expecting any aggressive intervention from the RBI and the currency is close to 97 now.

[00:05:03]What are the other non-intervention steps that the RBI could consider?

[00:05:09]So, FCNR B and NRI incentives, I think that is that may be on cut because that was also done in the past. And we did see some results I mean, couple of years back when we were depreciating sharply, these measures were taken. So, this could be one of the measures in their mind and second could be thinking of some sectors where we can curb some imports like electronics apart from gold, silver. So, maybe that could be the second thought in their mind that can from the government side we can think of some element of, you know, reducing imports. Third could be taxation benefits so that on the bond side in case if that remains firm so that at least the flows come more sharply at least into the debt segment not if equities then at least in the debt segment so bond I mean reassessment of taxation can be thought of but at the end of the day demand and supply defines the equilibrium so irrespective whatever measures we take until unless crude oil prices cool off and yields do cool off particularly talking about the geopolitical issues these measures would be interim in nature and plus these cannot be a permanent measures also so once these measures are even off the table like for example when RBI did put some measures for NDF market you know things were pretty good we saw levels of 92 half also but again as I said in a developing market and trying to be a developed economy such measures can be short-lived and at times it backfires also like a spiral effect so we need to be watchful of these measures but as I said global factors I mean rupee cannot be sidelined by some measures if depreciation persists across Asian currencies then rupee will be a participant to it Kunal last question on your first point I'm going back to this FCNR deposits or any kind of you know dollar denominated bonds any of these measures what will have to be offered to really make the scheme attractive I mean at a time and even if you'll have to do something for NRIs to really send in the dollars right very attractive rates so what could it be because otherwise you know the equity market here is not offering any attractive returns or anyway I mean we're not getting FPI flows from that perspective in any in any sense so what will have to be done to make these deposits or any of these bonds actually attractive >> I think, I mean, if you talk about equities first, I mean, last complete year was a flattish year.

[00:07:46]Uh no returns to investors. Uh considering this year also, we assume it should be maybe flattish to negative uh considering the current scenario at least. Uh on the FCNR(B) front or NRI incentive, I think the rate is only uh way where obviously we can attract more uh flows into the country. Uh and historically also in the last couple of years, we have seen uh one of the highest NRI flows also uh you know, in the country. So, uh taking that into account, uh I think the rate is only play where RBI can think of to attract that.

[00:08:24]Mm. Okay.

[00:08:26]All right, Kunal. Thanks very much for uh joining us once again to discuss all the options on the table. We'll let's see which ones I'm in the RBI, which ones the government exercise because this weakness in the currency doesn't look like it's going away anytime soon.

[00:08:38]Thank you for being with us once again.

[00:08:40]All right, Kunal. Have a great day.

[00:08:41]Thank you. Thank you. Have a wonderful day. Bye-bye.