MUMBAI: The Indian rupee is expected to be under pressure on Thursday after long-maturity US Treasury yields climbed to multi-year highs on expectations that rates will remain high for long.
Non-deliverable forwards indicate the rupee will open at around 83.26-83.27 to the US dollar compared with 83.2575 in the previous session and within a whisker of the 83.29 record low.
The Reserve Bank of India has over the last several days intervened to prevent the rupee from falling to a lifetime low.
“Looking at how US yields keep marching higher and how oil prices are, you would have to at least consider the possibility that the RBI will relent,” a forex trader at a Mumbai-based bank said.
“From what I have seen this week, odds of a new low (on rupee) are now higher.” The 10-year US Treasury yield rose to 4.9550% in Asia, the highest in sixteen years.
Federal Reserve officials once again signalled their preference for keeping interest rates high which alongside robust US economic momentum is prompting investors to pile out of Treasuries.
Indian central bank likely offering US dollars to defend rupee
Reiterating a common talking point among policymakers, New York Fed President John Williams said the central bank needs a restrictive monetary policy for a while to cool inflation.
Futures traders have lowered bets on the Fed cutting rates late next year to less than two from a previous four, while extending a target rate projection of 5% or more through to September 2024.
“Resilient US economic data brought the high-for-longer rate outlook back into the limelight lately,” Singapore-based Yeap Jun Rong, market strategist at IG Asia, said, referring to the better-than-expected US retail sales data released on Tuesday.
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