Indian rupee to rise after US yields reverse inflation-led spike, Fed hike bets remain low

MUMBAI: The Indian rupee is likely to rise at the open on Thursday, boosted by the pullback in US Treasury yields after ​an initial rise on sticky inflation data, with traders still pricing ‌in limited chances of a Federal Reserve rate hike in October.

The india rupee is expected to open in the 95.02 to 95.06 range, per traders, having settled at 95.15 ​to the dollar on Wednesday.

The focus is squarely on the Reserve ​Bank of India and how far it is willing to go ⁠to shore up the india rupee.

The central bank has curbed dollar demand ​through a series of measures, following that up with direct dollar sales.

The message ​from the RBI is “unmistakable,” a currency trader at a bank said, about arresting the currency’s slide.

“The question now is how far the RBI is willing to go, and how ​much further the market will allow it,” he said.

“Signs of resistance were ​already evident yesterday,” he said, pointing to the rupee rally hitting a hurdle past the ‌95 ⁠level.

US yields, FED hike odds whipsaw

US Treasury yields surged initially after US inflation rose more than expected in September, and traders sharply increased bets on a Fed rate hike this month.

The move, however, reversed, with analysts attributing the ​pullback to risk aversion. ​Morgan Stanley further ⁠pointed to demand from real-money and fast-money investors as the reason behind the pullback in yields.

US Treasury yields surged initially after US inflation rose more than expected in September, and traders sharply increased bets on a Fed rate hike this month.