Indian rupee to weaken as oil, US yields weigh; fading Fed hike bets offer no relief

MUMBAI: The Indian rupee is poised to drop on Thursday, with higher oil prices and US Treasury yields piling pressure on the ​currency while fading October Federal Reserve rate hike bets offer little ‌relief.

The Indian rupee is expected to open in the 95.96 to 95.98 range, per traders, having settled at 95.83 to the dollar on Wednesday.

The Indian rupee has pared losses from ​around 96.14 per dollar, which it hit on Tuesday, aided by ​likely Reserve Bank of India intervention, with traders saying the ⁠central bank appears intent on preventing a sustained break past the 96 ​level.

“Overall, the 96 level remains an important psychological and technical area, with the ​rupee showing some resilience each time it approaches that level, thanks largely due to the Reserve Bank of India,” Anil Bhansali, head of advisory at Finrex Treasury Advisors, said.

He ​reckons the rupee’s downside pressure will persist with oil prices elevated and ​US yields on the rise, leaving RBI intervention to largely contain, rather than turn, ‌the move.

Oil, US yields strain

Brent crude for December delivery rose nearly 2% on Wednesday, buoyed by stalled US-Iran talks and tightening fuel markets, taking its September rally to around 14%.

The 10-year US Treasury yield rose to near its highest ​level since 2007 ​on Wednesday, shrugging ⁠off softer-than-expected August inflation data and fading expectations of an October Fed rate hike.

Lingering inflation concerns kept pressure on ​longer-dated yields, limiting the relief from softer-than-expected data.

US bond yields ​posted ⁠their biggest monthly rise in years in September, with the ongoing Middle East conflict keeping oil prices high and fuelling concerns over the inflation outlook. The ⁠10-year yields ​posted their biggest quarterly jump since 2009.

The ​odds of a Fed rate hike at this month’s meeting dropped to below 40%. They were ​more than 70% a week back.