MUMBAI: The Indian rupee weakened against the dollar on Thursday as the greenback advanced, bolstered by a spike in Treasury yields. The rupee was quoting at 79.5075 per US dollar by 0505 GMT, down from 79.4500 in the previous session.
The rupee on Wednesday halted a four-day winning run following a higher-than-expected US consumer inflation data which has bolstered bets of another supersized rate hike by the US Federal Reserve later this month. The local unit had earlier this week reached near to 79.
“USDINR remains fairly comfortable, but a sharp INR appreciation has been kept at bay by the US inflation data,” said Srinivas Puni, managing director at QuantArt Market Solutions. “There could be a sideways movement in the pair until the 21st Fed meeting. The caveat being that any resumption in equity market panic could lead to a move towards 80 again.”
Risk aversion eased a bit, with Asian equity gauges mostly rangebound. US equity futures were a tad higher, while Indian shares slipped.
Meanwhile, the dollar index was marginally higher and Asian currencies mostly lower, tracking the uptick in Treasury yields. The 2-year Treasury yield climbed above 3.80%, hovering near multi-year highs.
The August US inflation data has reaffirmed the upward trend in Treasury yields and the dollar.
It is now almost certain that the Fed will deliver another mega rate hike at next week’s meeting. Further, Fed futures point to the central bank likely delivering a third straight 75 basis-point rate hike.
Indian rupee slides as US inflation surprise fuels rate-hike fears
There is a near 25% chance of it delivering an even bigger 100 bps increase as it battles runaway inflation.
Rupee forward premiums were almost flat, with the 1-year implied rate just above 2.80%.
Open interest on USD/INR NSE near-month futures dipped slightly.
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