MUMBAI: The Indian rupee is likely to weaken more on Wednesday after the dollar index rose to the highest in just under six months on weak risk and rising US Treasury yields.

Non-deliverable forwards indicate rupee will open at around 83.10-83.12 to the US dollar, compared to 83.04 in the previous session which was a two-week low.

US Treasury yields rose on Tuesday with the 10-year yield now about ten basis points shy of the recent high.

Expectations that the Federal Reserve will keep rates high for longer have prompted investors to push the 10-year yield to the highest since 2007.

Federal Reserve Governor Christopher Waller said on Tuesday that he felt US treasury yields were about where they should be and cautioned against assumptions about no further Fed tightening.

The dollar index rose to the highest since mid-March. Resilient US yields will keep the dollar “well-bid” and all eyes today will be on the Reserve Bank of India (RBI), Ritesh Bhansali, vice president at Mecklai Financial, said.

When the rupee dropped below 83 last month, the RBI intervened both in the onshore over-the-counter market and the non-deliverable forwards market to prevent it from hitting a record low.

The rupee’s fell to 83.16 last month, just shy of the lifetime low of 83.29.

Poor risk appetite further boosted demand for the safe-haven dollar.

US equities dropped overnight and most Asian gauges were lower.

A few analysts reckon that the dollar was over-valued at current levels.

“We suspect a deterioration in the economic outlook remains the only real path for the mis-valuation gap to close,” ING Bank said in a note.

“What this gap is telling us now is that the dollar correction, once the US data turns, can be quite rapid and substantial.”