Rupee strengthens on FPI buying, bond market remains under pressure
Published on 19/08/2025 05:43 PM
Rupee strengthens on FPI buying, bond market remains under pressureThe Indian rupee emerged as the best-performing currency, gaining 0.5% amid renewed optimism from foreign portfolio investor (FPI) inflows. The rally, entirely market-driven with no intervention from the Reserve Bank of India, is supported by positive trade sentiment and hopes of resolving tariff issues. Meanwhile, the bond market faces severe stress, with banks and insurers struggling and FPIs turning sellers, reflecting broader fixed-income market weakness.By Latha Venkatesh August 19, 2025, 5:43:19 PM IST (Published)2 Min ReadThe Indian rupee emerged as the best-performing currency today, gaining around 0.5% even as the US dollar remained relatively strong. The rally comes as a surprise after weeks of negative news and significant foreign portfolio investor (FPI) outflows.
On Monday, FPIs returned with inflows, sparking optimism in the market. Traders say FPIs are selling dollars and buying rupees, prompting some long-dollar positions to unwind.
The Reserve Bank of India (RBI) has not intervened in the market, making the rupee’s recovery entirely market-driven. Traders say positive chatter around resolving tariff issues by late August, along with easier trade with China, is further boosting sentiment. There is growing speculation that the worst may be over for the rupee.
Meanwhile, the bond market is facing severe stress. Even before the recent S&P rating upgrade, there was little demand for bonds, leaving the market “broken.” The temporary rally following the upgrade was short-lived, with a sharp sell-off observed recently, partly triggered by GST cut announcements.
Banks are grappling with losses in their hold-to-maturity portfolios, while insurance companies are seeing muted demand for forward purchases. FPIs, who were earlier buyers of bonds, have turned sellers, reflecting a broader aversion to fixed-income assets.
The negative sentiment is not limited to India. Global bond markets, including the US, are also witnessing weak demand, leaving the domestic market highly vulnerable. With no immediate intervention from the RBI, the market remains in limbo, waiting for positive triggers to restore confidence.Continue Reading(Edited by : Ajay Vaishnav)Check out our in-depth Market Coverage, Business News & get real-time Stock Market Updates on CNBC-TV18. Also, Watch our channels CNBC-TV18, CNBC Awaaz and CNBC Bajar Live on-the-go!Tagsindian rupeerupee