Rising US yields, oil headwinds put RBI’s Indian rupee 96 buffer to the test

MUMBAI: The Indian rupee is expected to come under pressure at Tuesday’s open, weighed down by higher US yields and oil prices, putting it at risk of slipping past the 96-a-dollar mark, seen as a key near-term support level. The Indian rupee is expected to open in the 95. 99-96. 02 range, per traders, after settling at 95. 9825 per dollar on Monday. India’s central bank may be reluctant to see the rupee break past the psychologically important 96-per-dollar mark and could intensify ⁠its intervention, having been a near-daily presence in the market in recent weeks, market participants said. Analysts have noted that the Reserve Bank of India has higher firepower to do so following the recent build-up in foreign exchange reserves from inflows linked to special measures it has introduced. “The RBI intervention is a given at this point. The real question is whether it is going to keep defending levels, or simply smooth the move and let the rupee adjust more, ” a currency trader ⁠at a bank said. The rupee has been under persistent pressure from the stubbornly high oil prices, while a jump in US yields and a hawkish repricing of Federal Reserve policy expectations have compounded the strain. The dollar index is trading near a two-month high. Markets now ⁠see a near 70% probability that the Fed will follow this month’s rate hike with another increase in October, up from less than 20% a month back. US yields ratchet higher US ⁠Treasury yields rose on Monday with the surge in oil prices stoking concerns that inflation could prove stickier, raising the prospect of further Fed rate ⁠increases. The 10-year US yield climbed 6 basis points to 5. 24%, hovering near a nearly two-decade high. Oil prices rose on Tuesday on concerns over prolonged supply disruptions in the Middle East.

Read full story on Business Recorder