INDIA RUPEE-RBI Intervention shields rupee as global yields soar on inflation worries

By Reuters News06:22 (UTC), 24 September 2026 Updated

By Jaspreet Kalra

MUMBAI, Sept 24(Reuters) - The Indian rupee declined to a near one-week low on Thursday, pressured by a surge in global bond yields, as traders assessed the prospect of central bank rate hikes to combat inflation, which has been exacerbated by the Iran war.

Dollar sales by state-run banks, most likely on behalf of the Reserve Bank of India, helped limit losses and keep the rupee above the 96-per-dollar mark.

The currency was last at 95.9075 per dollar, down 0.2% on the day.

A closely watched measure of US business activity, S&P Global's flash US Composite PMI Output Index, jumped for September to its highest since July 2021, while the survey's measure of prices paid by businesses for inputs surged to a nearly four-year high, stoking worries over inflation.

This sent Treasury yields higher across the curve, as traders raised the odds of a Federal Reserve rate hike in October to 70%, up 55% from a day earlier and 11% a month ago.

The 5-year US bond yield hit its highest level since 2007, while Japan's 10-year bond yield rose to levels last seen in August 1996.

"After the September Fed hike, we retain our out-of-consensus call for two more rate increases in October and December. Whereas hikes looked politically challenging for (Fed Chair) Warsh a few months ago, they now appear politically expedient," BofA Global Research said in a note.

The firm holds a neutral view on the rupee, noting that overseas forex deposit inflows under the Reserve Bank of India's one-off policy measures, and more balanced portfolio flows, have replenished the central bank's forex reserves and given it ammunition to curb depreciation risks.

India's FX reserves stood at $780 billion as of the week ended September 11, up nearly $94 billion year-to-date.

Elsewhere, Indonesia's central bank also stepped into the FX market to defend the rupiah amid broad-based pressure on Asian currencies. Regional equities declined, with stocks in Mumbai .NSEI down nearly 1%.