Indian rupee faltering rally faces returning oil pressure, surging US yields

MUMBAI: The Indian rupee’s faltering rally faces further challenges on Friday, as rising oil prices revive a key source ​of pressure and surging US yields bolster the dollar.

The Indian rupee is expected to open weaker than the 94-per-dollar mark and remain under pressure, after falling below it on Thursday in its biggest daily decline in ​nearly three weeks.

The external backdrop is turning less favourable for the ​rupee, which has now faced resistance at the 94-per-dollar ⁠mark for three straight sessions.

Brent crude, which had fallen below $90 a ​barrel earlier this week, climbed to $96, after fresh attacks on Saudi ​energy infrastructure and disruptions to shipping through the Strait of Hormuz.

Meanwhile, the 10-year US Treasury yield rose well above the 5% mark after President Donald Trump ​said the United States did not need a deal with ​Iran.

US Treasury yields have climbed sharply in recent sessions after higher-than-expected US inflation data ‌strengthened ⁠expectations of further Federal Reserve rate hikes.

Markets are fully pricing in a 25-basis-point Fed rate hike in December, with a small probability of a larger 50-basis-point increase.

The worries over oil prices and US ​Treasury yields come ​at a ⁠time when the rupee’s recovery is already facing resistance.

Thursday’s session offered evidence of that, with the currency ​climbing to an intraday high of 93.60 before coming ​under ⁠pressure and slipping past the 94-per-dollar mark.

Bankers said the rupee’s inability to extend its rally in recent days despite robust equity inflows has ⁠fuelled speculation ​that the Reserve Bank of India ​may be buying dollars, while oil companies could be returning to the spot market ​to meet their dollar requirements.