MUMBAI: The Indian rupee is expected to extend its decline on Friday, weighed by a rising dollar index and US yields following hawkish comments from Federal Reserve officials.

Non-deliverable forwards indicate rupee will open at around 82.70-82.75 to the US dollar compared with 82.60 in the previous session.

The local currency is near the lowest level in almost two months. “Expect RBI (Reserve Bank of India) to intervene right at the open,” a forex spot trader said.

“Highly doubt that RBI will allow a move above 82.80-83.00 (on USD/INR). That would just make it all the worse for the rupee at a time when it is already under significant pressure.”

USD/INR overnight swap rate will be a key factor to watch besides the RBI, he added. The overnight swap rate posted a sizeable decline, which traders said was likely due to a cash dollar shortage.

The dollar index inched higher in Asia to add to Thursday’s rally, reaching its highest level since mid-March.

Indian rupee hits six-week low on broad dollar strength

Asian currencies declined, with the Chinese yuan once again leading the way.

The offshore yuan dropped to 7.0750 to the dollar, a level last seen in December. Higher US yields boosted demand for the dollar.

The 2-year US yield climbed to 4.28% on comments by Fed officials and US labour market data.

Two Fed policymakers said on Thursday that US inflation does not look like it is cooling fast enough to allow the central bank to pause its interest-rate-hike campaign.

Meanwhile, the number of Americans filing new claims dropped more than expected, suggesting a resilient labour market.

“The current strength of the labour market does not support the Fed’s view that the unemployment rate will lift to 4.5% by year-end,” ANZ said in a note The odds of a Fed rate hike in June rose to more than 30%.