The rupee and Government Securities felt the impact of the US Fed’s decision to keep interest rates unchanged, with the former breaching the 95 to the US dollar mark for the first time since March 30, 2026, and the yield of the latter hardening about 6 basis points.

The rupee (INR) opened almost 17 paise weaker at 95.01 per US dollar and is currently trading at an all-time low of 95.2475.

In a note on the US Fed holding its policy rate unchanged at 3.5-3.75 per cent, Emkay Global Financial Services Ltd’s Chief Economist Madhavi Arora and Research Associate Harshal Patel said: “RBI remains constrained in the current scenario.

“A hawkish Fed adds to the RBI’s policy constraints ahead, with the Middle East crisis persisting longer than expected.”

They observed that the RBI’s options to stabilize INR remain limited (with some of the regulatory measures aimed at containing the depreciation also being rolled back), especially with FPI flows expected to remain weak as long as Middle East tensions are elevated.

Amit Pabari, MD, CR Forex Advisors, said: “Right now, the rupee is no longer trading in isolation -- it is reacting to three dominant forces: oil, capital flows and central bank policies.”

State Bank of India’s economic research department has cautioned that without timely balance of payments (BoP) support measures, including a scheme soliciting funds from the diaspora, better tax treatment for investments in G-Secs, restricting remittances for deposits abroad and reducing the annual LRS (liberalised remittance scheme) limit temporarily in FY27, inflationary expectations could become unanchored amid persistent rupee weakness and volatile capital flows.

“The current rupee depreciation is not in line with India’s macro fundamentals. It is therefore imperative to control the second-round effects. Exchange rate depreciation leads to higher imported inflation.

“Hence, ensuring that inflationary expectations do not get unanchored, we need a structural solution to India’s BOP (balance of payments) deficit,” said Soumya Ghosh, Group Chief Economic Advisor, SBI in a note.

SBI’s ERD economists observed that the exchange rate cannot be construed as a shock absorbing mechanism in perpetuity, as increased levels of uncertainties and volatilities will transform it into a pass-through mechanism of imported inflation seeping through multiple channels, unanchoring inflationary expectations and defeating at times the very purpose of prudent and agile monetary policy making.

It is thus imperative that a comprehensive set of measures are required given that BoP could be negative for the third consecutive year.

Meanwhile, yields of Government Securities (G-Secs) hardened, with the yield of the benchmark 10-year G-Sec going past the crucial 7 per cent mark on rising global crude oil prices amid uncertainty over resolution of the West Asia war, blockade of the Strait of Hormuz and UAE pulling out of OPEC.

The benchmark 10-year paper is currently trading at a yield of 7.6 per cent against the previous close of 7 per cent.

Published on April 30, 2026