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MUMBAI: The Indian rupee was rooted at all-time lows on Wednesday as US yields surged and the greenback strengthened, with traders suspecting that the Reserve Bank of India’s intervention was keeping the local currency from weakening further.

The rupee declined 0.37% to 81.88 per dollar by 0511 GMT, having touched a record low of 81.9350 during the session.

The Indian central bank was suspected to be selling dollars via state-run banks at 81.90 levels, traders told Reuters, helping prevent a drop to 82-per-dollar levels.

Appetite for the dollar grew, while risk sentiment was tarnished as global markets sold off heavily on worries over high interest rates causing a recession after a chorus of US Federal Reserve officials overnight stuck to a hawkish tone to bring down inflation at home.

“The RBI’s intervention will likely be a temporary fix as there are heavy dollar bids in the market”, a trader with a foreign bank said.

Indian rupee inches up

The rupee could even weaken to 82.50 by the middle of October, he added, as the central bank’s policy decision at the end of this month was unlikely to support the currency for more than a couple of days.

On the day, benchmark 10-year US Treasury yields topped 4%, fuelling further gains in the dollar. Two-year Treasury yields were steady at 4.287%, having touched a 15-year peak earlier this week.

The dollar index rocketed 0.5% to a new two-decade high of 114.650. “Markets are completely dollar bullish. With near-term US yields rising so fast, investors seem to be pricing in for a recession soon,” said Anil Bhansali, head of treasury at Finrex Treasury Advisors.

Indian equities had a choppy session, as they recovered some of their earlier losses to trade down 0.4%, while benchmark government bond yields rose 4 basis points to 7.3376%.

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