Calm! Rupee Steadies at ₹89.50$: 3 Central Bank Policy Shocks
The final full week of November 2025 (Nov 23-29) brought a much-needed correction and period of stability to the Indian financial and Forex markets, contrasting sharply with the previous week’s record Rupee volatility. The key theme was the re-anchoring of global and domestic currency expectations, driven by clearer communication from major central banks and an apparent return of the Reserve Bank of India (RBI) to its strategic, albeit subtle, intervention stance.
1. 🇮🇳 Rupee Resurgence: The $\text{₹}89.50$ Level Holds Firm
Following its historic plunge the previous week, the Indian Rupee (₹) found strong technical and psychological support, trading in a tight range against the US Dollar ($\text{\$}$) and avoiding further depreciation beyond the critical $\text{₹}89.50$ level.
-
Intervention Confirmed: Forex analysts widely attributed the Rupee’s stability to the return of the RBI’s subtle intervention. Unlike the previous week’s absence, the RBI appeared to be selling US Dollars at key points to prevent a breach of $\text{₹}89.50$, indicating that the central bank’s non-intervention was a calculated pause, not a permanent withdrawal from defense. This restored market confidence and cooled speculative dollar buying.
-
FPI Inflows Stabilize: The flow of Foreign Portfolio Investment (FPI) into Indian equities showed signs of stabilizing. Strong corporate earnings reports for the December quarter (though not officially released this week, anticipation was high) and positive global risk sentiment stemmed the capital outflow, providing a crucial floor for the Rupee.
-
Exporters’ Hedging Strategy: This period of stability provided a window for Indian Exporters (like those on The Exporter Hub platform) who benefit from a weaker Rupee, to aggressively hedge their dollar receivables forward at the new, favorable exchange rate levels, locking in higher profitability.
2. 🇺🇸 US Fed Officials Tackle Uncertainty and Stablecoins
Statements from various US Federal Reserve (Fed) officials throughout the week emphasized the need for patience in policy easing and focused on new risks emerging in the financial system.
-
Patience is Key: Dallas Fed President Lorie Logan and New York Fed President John C. Williams both stressed that “economic uncertainty” remains a pervasive feature of monetary policy. They confirmed that while the Fed is in an easing cycle (with the Fed Funds Target Rate at $\text{3.75\%-4.00\%}$), the pace of future cuts will depend heavily on incoming economic data—much of which was delayed due to the US Government shutdown earlier in the autumn. This cautious stance calmed markets by managing expectations against overly aggressive rate cuts.
-
Financial Stability Watchlist: In a notable development, the Cleveland Fed highlighted the rising risks in the rapidly growing Private Credit Market and the need for new guardrails around Stablecoins. The growth of private credit, which operates outside of traditional bank regulation, and the $\text{70\%}$ year-to-date volume increase in stablecoins were cited as potential vulnerabilities that could amplify a future downturn.
-
Dollar’s Performance: The US Dollar Index (DXY) traded sideways, trapped between the domestic easing narrative and the persistent strength of the US economy relative to others. The DXY hovered just under the critical 100 level, directly influencing emerging market currencies like the Rupee.
3. 🇬🇧 South Africa’s Rate Cut and Global Easing Divergence
The global central banking landscape showed continued divergence in policy actions this week, highlighting different national inflation and growth struggles.
-
South Africa SARB Cuts Rate: The South African Reserve Bank (SARB), on November 21 (Friday before the start of this week’s trading), announced an unexpected 25 basis point (bp) cut to its policy rate, bringing it to $\text{6.75\%}$. The decision was unanimous, citing an improved inflation outlook (forecast to fall back towards the $\text{3\%}$ target) and the need to support economic growth.
-
Bank of England (BoE) Holds: In contrast, the Bank of England’s (BoE) Monetary Policy Committee (MPC) minutes (released earlier in the month but highly relevant this week) revealed a deep split on policy, ultimately holding rates at $\text{4\%}$. While some members voted for a cut, the majority insisted that “more evidence is needed” to ensure inflation persistence is fully defeated, keeping the Pound Sterling ($\text{£}$) relatively firm.
-
Global Impact: This divergence means the carry trade remains attractive, with investors borrowing in lower-rate countries (like the Eurozone or US) and investing in higher-yielding Emerging Markets (EMs). India, with its comparatively strong growth and high real interest rates, remains a beneficiary of these capital flows, providing underlying support to the Rupee.
4. 💻 Crypto and Digital Assets Gain Institutional Traction
The integration of digital assets into mainstream finance continued to accelerate, moving beyond niche trading into institutional portfolios.
-
Bitcoin and Ethereum Stability: Despite regulatory uncertainty, Bitcoin held steady around the $\text{\$105k}$ mark, and Ethereum regained traction. This stability was primarily driven by continued institution-driven interest through newly launched Exchange-Traded Funds (ETFs).
-
Cross-Border Payments: Fed officials, in their financial stability comments, acknowledged that the most promising applications of stablecoins lie in expediting cross-border payments and providing a safe, easily transferable US dollar asset for foreigners to hold. This development signals that digital currencies are becoming part of the official dialogue on global financial infrastructure, a key trend for international trading platforms.
Source Link : www.clevelandfed.org
Add a Comment