MUMBAI: The Indian rupee is likely to open near its record low levels on Thursday with the surge in crude oil prices and rising US treasury yields expected to hurt the local unit.
Non-deliverable forwards indicate rupee will open close to its record low against the US dollar compared with a close at 83.22 in the previous session.
The rupee had hit its lowest level on record - 83.29 - in October 2022 The rupee came close to testing its record lows on Wednesday as well but likely intervention from the Reserve Bank of India (RBI)helped avert the fall.
The market’s focus will be on whether the RBI supplies dollars in non-deliverable forwards ahead of the spot markets opening, a foreign exchange trader at a private bank said.
“Expect 83.35 to be the next resistance (for USD/INR).” Brent crude oil futures jumped by 0.8% to $97.32 in Asia trading, rising about 12% in September alone.
The 10-year US Treasury yield climbed to a fresh 16-year high overnight but was slightly lower in Asia at 4.61%. “(A move to) 5% is looking more probable by the day,” ING Bank stated in a note, referring to the possibility of the US 10-year Treasury yield continuing its rise.
The dollar index also climbed to a fresh near-10-month high of 106.84 overnight and was hovering close to those levels. Asian currencies were mostly weaker, with the Malaysian ringgit leading losses.
“Intraday low can’t be ruled out even if the RBI intervenes,” said Dilip Parmar, a foreign exchange research analyst at HDFC Securities.
Equity-related outflows also bolstered pressure on the rupee as foreign investors are close to breaking a six-month buying streak, having sold $1.51 billion worth of equities in September so far.
Investors will also keep an eye on whether FTSE Russell includes India in its emerging markets government bond index.
The decision is expected on Sept. 28.
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