Currency and Foreign Exchange Reserves - The Reserve Bank of India (RBI) is expected to start buying dollars to strengthen its foreign-exchange reserves when the rupee reaches around 88-89 per dollar [1] - Currently, the rupee is projected to trade in a range of 90 to 91.25 per dollar in the short term, closing at 90.88, which is a 0.1% increase [1] - Despite record high reserves of $725.7 billion, the RBI has a $62 billion short forward book that may require delivering dollars to banks, potentially depleting reserves [2][3] Market Dynamics and Foreign Inflows - The rupee has underperformed compared to Asian peers, falling nearly 5% in 2025 due to high US tariffs and significant equity outflows [4] - Seasonal inflows are expected to improve in February and March, which could support the rupee and attract more foreign investments into Indian bonds [4] - The bond market may face pressure from a heavy supply of sovereign debt, with total federal and state borrowing projected at close to 30 trillion rupees ($330 billion) [5] Bond Market Outlook - Sovereign borrowing costs are anticipated to rise as new supply enters the market in the financial year starting April, with the 10-year yield expected to trade between 6.75% and 7.00% [6] - Recent tax changes and revised mandates for large investors have reduced demand for long-term debt, widening the yield gap between short- and long-term bonds [6] - The RBI may need to purchase between 3 trillion to 5 trillion rupees of bonds in the next fiscal year to address the supply-demand imbalance in government debt [7]

Foreign Exchange Reserves - Asia's foreign-exchange reserves have surged to almost $8 trillion [1] Currency Defense - Authorities from Tokyo to Mumbai have ample ammunition to defend their currencies [1]

Foreign Exchange Reserves - Indonesia's foreign-exchange reserves fell to the lowest in more than a year [1] Currency - The central bank increased efforts to defend the weakening rupiah [1]