MUMBAI: The Indian rupee declined against the dollar on Monday on concerns over rising US yields, but avoided falling below a level considered critical by market participants.
The rupee ended at 82.7175 per US dollar, down from 82.4975 in the previous session. The local currency settled into a narrow range after opening at 82.68, once again managing to hold above the 82.80 level.
The 82.80 to 83 area is considered an important level and the USD/INR pair has struggled several times in recent days to breach it.
Indian rupee seen struggling to rise much in coming months
Currently, the pattern is shaping up to be the same as in December when the Reserve Bank of India (RBI) was not allowing the rupee to fall below 83 levels, a currency dealer at a private sector bank said.
The RBI, at that time, was selling dollars via public sector banks, according to traders.
So as long as the rupee remains above 83, trading activity will remain subdued, the dealer added.
Major Asian currencies fell on Monday, bogged down by US yields. The 10-year US yield rose above 3.75% to a fresh six-week high and the two-year reached its highest level since November-end.
The likelihood of more Federal Reserve rate hikes and the possibility that the rates would remain high for long prompted investors to avoid US bonds.
The US consumer inflation data is due after Asian market hours on Tuesday, a print that will be closely watched by the bond and other markets.
The US data could shake the outlook for interest rates globally, said Amit Pabari, managing director at CR Forex. With the stunning US labour market data last week, an upward surprise on inflation will be a concern, Pabari added.
The rupee premiums fell, tracking higher US yields and USD/INR spot, with the 1-year implied yield falling to near 2.10%.
Comments
Comments are closed for this article.