MUMBAI: The Indian rupee on Friday will have to deal with a surge in US Treasury yields and a rally on the dollar following hawkish commentary from US Federal Reserve officials, including Chair Jerome Powell.
Non-deliverable forwards indicate the rupee will open at around 83.27-83.29 to the US dollar compared with 83.28 in the previous session and near its 83.2950 lifetime low.
The move up in US yields “will bother the rupee”, but then “it never reacted to the move lower on US yields and it will not react to the reversal”, a forex trader said.
“At the current level, you can’t expect anything to happen.”
The 10-year US Treasury yield jumped in the New York session on Thursday as a weaker than expected 30-year US bond auction alongside comments from Fed Chair Powell upended the recent rally.
The 2-year yield rose to 5.04% and the dollar index was just shy of the 106 handle.
The Fed is committed to achieving a stance of monetary policy that is sufficiently restrictive to bring inflation down to 2% over time and that it is not confident that such a stance has been achieved, Powell said at an International Monetary Fund event.
India rupee down in line with Asian peers, premiums retreat
Powell’s sentiment was largely echoed by other Fed speakers on Thursday.
“It’s clear that the Federal Reserve wants to maintain a tightening impulse. This makes sense, as any hint of neutrality would hasten a market dash to discount rate cuts,” ING Bank said in a note.
Asian currencies declined and shares were mostly lower after US equities retreated.
The next key event will be the US inflation data next week.
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