Indian rupee ends marginally lower as central bank shields from oil, yield strain

MUMBAI: The Indian rupee closed marginally weaker on Tuesday as likely central bank intervention stood between the South Asian unit and the pressure from elevated oil prices and surging global bond yields.

The Indian rupee closed at 95.68 per dollar, down modestly from its close of 95.6025 in the previous session.

The Reserve Bank of India likely intervened across market segments to support ​the rupee on Tuesday, traders said. The intervention anchored the currency even as its Asian peers slipped, with the Philippine peso down 0.5% and Indonesian rupiah down 0.2%.

The rupee, rupiah and peso triplet is seen as among the most vulnerable to energy price shocks due to sizeable energy imports.

Rising bond yields were also a pain point on Tuesday as long-term borrowing costs from the U.S. to Japan and Germany rose to their highest levels in decades as renewed inflation worries added to lingering concerns of fiscal pressures across major economies.

Thirty-year bond yields in the United States hit their highest since 2007.

“A big sell-off in the long-end of the Treasury market is typically bad news for emerging market currencies and risk in general. We are not quite at that point yet, but a further rise in yields may increase the pressure on the U.S. Federal Reserve to act,” analysts at ING said in a note.

Indian government bond yields rose as well, with the yield on the 10-year note up 2 bps at 6.827% while local stocks slipped about 0.3%, tracking weakness in regional equities.

The focus will now be on the release of the minutes of the Indian central bank’s August policy meeting, due on Wednesday.