The Indian rupee is expected to face challenges due to a rise in U.S. Treasury yields and a surge in the dollar following hawkish comments from U.S. Federal Reserve officials, including Chair Jerome Powell. Non-deliverable forwards suggest that the rupee will open at around 83.27-83.29 against the U.S. dollar, slightly lower than the previous session’s rate of 83.28 and close to its all-time low of 83.2950.
According to a forex trader, the increase in U.S. yields will affect the rupee, but it did not respond to the previous decline in U.S. yields, so it is unlikely to react to this reversal either. The trader stated, “At the current level, you can’t expect anything to happen.”
The 10-year U.S. Treasury yield rose during the New York session on Thursday due to a weaker-than-expected 30-year U.S. bond auction and comments from Fed Chair Powell. The 2-year yield reached 5.04%, and the dollar index was close to 106.
Powell emphasized the Fed’s commitment to achieving a restrictive monetary policy to bring inflation down to 2% over time. Other Fed speakers echoed this sentiment. ING Bank noted that the Federal Reserve’s desire to maintain a tightening stance is logical, as any indication of neutrality would trigger a rush in the market to discount rate cuts.
Asian currencies declined, and shares mostly experienced losses following a retreat in U.S. equities. The next significant event to watch out for is the release of U.S. inflation data next week.
Key indicators include the one-month non-deliverable rupee forward at 83.31, the onshore one-month forward premium at 4.25 paisa, the dollar index at 105.86, Brent crude futures up 0.2% at $80.2 per barrel, and the ten-year U.S. note yield at 4.62%. According to NSDL data, foreign investors sold a net $107.2 million worth of Indian shares on November 8, but they bought a net $141.2 million worth of Indian bonds on the same day.
(Reporting by Jaspreet Kalra; Editing by Mrigank Dhaniwala)
