The Indian rupee is expected to remain under pressure this week as investors gauge the impact of a steep levy on U.S. work visas heavily used by Indian immigrants, while government bonds will react to developments on the second-half fiscal borrowing plan.
The rupee closed at 88.09 on Friday, up 0.2% on the week.
The Trump administration said on Friday it would ask companies to pay $100,000 per year for H-1B worker visas.
India accounts for 71% of the beneficiaries of such visas and the fees, according to India's IT industry body, could disrupt the global operations of Indian technology services firms.
"Services exports have finally been dragged into the ongoing global trade and tech war," Madhavi Arora, chief economist at Emkay Global Financial, said in a note. If sustained, the fee could disturb Indian IT exports and disrupt Indian IT supply chains, the note said.
Worries over the impact of steep U.S. tariffs on Indian exports have kept the rupee under pressure over recent weeks and traders reckon that the downward bias is likely to persist in the absence of positive news flow on the India-U.S. trade negotiations.
India's Trade Minister will visit Washington on September 22 for talks on a long-pending trade deal.
The rupee is likely to face pressure early in the week and worries over how U.S. immigration policies impact remittances to India could be a drag for the currency, a trader at a state-run bank said.
The U.S. accounted for the largest share of foreign remittances to India at 27.7% in the fiscal year ended March 2024, according to central bank data.
Meanwhile India's 10-year benchmark 6.33% 2035 bond yield settled at 6.4885% on Friday, little changed week-on-week.
Traders anticipate the yield will remain in the 6.47% to 6.53% band this week, with focus on any news regarding borrowing calendar or central bank action to support the bond market.
Bond yields rose last week even after the Federal Reserve reduced interest rates and indicated more cuts in 2025, as Chair Jerome Powell said the Fed will be in a "meeting-by-meeting situation" regarding the rate cut outlook.
This fueled expectations that the rate easing cycle may not be a long one.
Bond yields have jumped sharply recently, as concerns over demand-supply mismatch have come to the fore, with investors facing mark-to-market losses on existing holdings, traders said.
"Bond valuations have become attractive especially at the longer end of the curve and in the state debt space," said Puneet Pal, head of fixed income at PGIM India Mutual Fund.
"We expect RBI to come up with some steps to address the current dislocation in bond yields, especially in the state debt curve."
In a round of consultations with multiple market participants earlier this month, the central bank received suggestions to reduce the share of ultra-long bonds in overall supply and cut weekly auction sizes.
New Delhi will detail the October-March borrowing calendar before end of this month. KEY EVENTS: India *
* September HSBC manufacturing, services and composite Flash PMI - September 23, Tuesday (10:30 a.m. IST) U.S. *
* September S&P Global manufacturing, services and composite Flash PMI - September 23, Tuesday (7:15 p.m. IST) *
* August new home sales units - September 24, Wednesday (7:30 p.m. IST) ** August durable goods - September 25, Thursday (6:00 p.m. IST) *
* April-June final estimate of GDP - September 25, Thursday (6:00 p.m. IST) *
* August housing starts numbers - September 25, Thursday (6:00 p.m. IST) *
* Initial weekly jobless claims for week to September 15 - September 25, Thursday (6:00 p.m. IST) *
* August personal consumption expenditure index, core PCE index - September 26, Friday (6:00 p.m. IST) *
* September U Mich sentiment final - September 26, Friday (7:30 p.m. IST)
Source Name : Economic Times