Rising US yields on Fed rate hike bets pile pressure on sliding Indian rupee

MUMBAI: The Indian rupee may hit an all-time low on Wednesday, as a surge in U.S. Treasury yields on rising expectations of a ​Federal Reserve rate hike this year compounds pressure on the ‌already fragile currency.

The Indian rupee is expected to open in the 96.75-96.80 range, per traders, having settled at 96.5325 on Tuesday.

The currency is on a seven-session losing streak, logging fresh lows against ​the U.S. dollar in six of those days. It has ​already shed 0.6% this week, extending a 1.6% decline from last ⁠week.

A surge in U.S. Treasury yields amid a broad selloff in developed market ​bonds is amplifying pressure on the rupee, which is already under ​strain from oil prices that are distorting daily dollar demand and weighing on capital flows.

The 10-year U.S. yield has jumped over 20 basis points in four days, while ​the 30-year yield has hit its highest since 2007. Shorter maturities have ​followed suit, with the jump driven by war-linked inflation concerns pushing up expectations of Fed ‌rate ⁠hikes this year.

A selloff across U.S. bond markets has accelerated over the past week on stalled U.S.-Iran talks fuelling worries that oil prices will remain high for longer than anticipated.

Brent crude held near $111 per barrel on Wednesday, with U.S. President ​Donald Trump’s comments ​that the ⁠Iran conflict will be resolved “very quickly” having little impact. With crude holding well above the $100 mark, markets are ​pricing in a near 50% probability of a Fed ​rate ⁠hike in 2026, a stark shift from a month ago when investors saw little to no chance of policy tightening.

“The rupee, having largely adjusted ⁠to the ​prospect of persistently high oil prices, ​now faces a repricing due to the sizeable shift in U.S. rates,” a currency ​trader at a bank said.