The Indian rupee will rely on central bank help on Tuesday to avoid a slide to a record low, after robust US manufacturing data pushed the dollar index to its highest level in more than four months.
Non-deliverable forwards indicate the rupee will open flat to slightly weaker against the US dollar from 83.40 on Monday. The local currency hit a record low of 83.45 last Wednesday, prompting the Reserve Bank of India (RBI) to intervene, according to bankers.
“You would expect the RBI to sell (USD/INR) and the price action at the open will reflect that,” said a forex trader at a private sector bank.
“But with the way the dollar and US yields are, dips (on USD/INR) won’t amount to much.”
The dollar index rose in the New York session and rose further in Asia after an unexpected increase in US manufacturing activity prompted investors to downgrade the chances of a Federal Reserve rate cut at its June meeting. A reduction during the May meeting has already been discounted.
The Institute for Supply Management’s (ISM) U.S. manufacturing PMI rose to 50.3 last month, from 47.8 in February and compared with estimates of 48.3. This was the first time since September 2025 that the US manufacturing PMI rose. This was the first time since September 2022 that the PMI exceeded 50, a level that separates expansion from contraction.
“The ISM manufacturing index surprised everyone by moving into growth territory,” ING Bank said in a note. The market interpretation is that this reduces the likelihood of meaningful rate cuts from the Fed, the bank said.
US Treasury yields rose and the dollar index climbed past 105 for the first time since November. The S&P 500 Index fell and the dollar index rose. The S&P 500 Index fell and futures on the gauge were lower in Asia.
KEY INDICATORS: ** One-month non-deliverable rupee forward at 83.46; onshore one-month forward premium at 5.75 paise ** Dollar index rises to 105.04 ** Brent crude futures rise 0.4% to $87.8 per barrel ** Ten-year US note yield at 4.31% * * Foreign investors bought a net $485.1 million worth of Indian stocks on March 27, according to NSDL data
** According to NSDL data, foreign investors bought $173 million worth of Indian bonds on March 27 (Reporting by Nimesh Vora; Editing by Rashmi Aich)
