MUMBAI: The Indian rupee is expected to remain under pressure on Friday after longer maturity US yields reached the highest level this year. Non-deliverable forwards indicate the rupee will open slightly weaker to the US dollar from 82.7225 in the previous session.
The rupee on Thursday reached 82.81, the lowest in more than two months, on the possibility that the Reserve Bank of India intervened to prevent the currency from dipping further, according to market participants.
USD/INR “remains well bid” offshore, possibly on account of positions being adjusted to “what is happening in US yields”, a forex trader at a bank said.
“The rupee and the whole EM complex will not see any sort of relief if the volatility in US yields remains high.” The 10-year US yield on Thursday climbed to 4.20%, the highest since Nov. 2022.
The yield is up about 35 basis points (bps) in the space of about two weeks.
The Fitch downgrade of the US credit rating, broadly resilient US data and rising US inflation expectations have contributed to the selloff in Treasuries.
Indian rupee drops, but confidence on RBI largely caps losses
The 30-year US yield is up 40 bps in two weeks.
The focus now shifts to the US non-farm payrolls report due later in the day.
Data that indicates that the US labor market continues to hold up well will not be received well by the already nervous US bond investors.
Economists polled by Reuters expect 200,000 job additions and average wage growth of 0.3% month-on-month.
Considering the decline in the US jobless claims in July, “we cannot rule out surprises in today’s NFP”, DBS Research said in a note.
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