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The Indian rupee came under pressure, led by a sharp uptick in Brent crude prices and surging Treasury yields, coupled with a strong dollar. The domestic unit closed at 95.95 per dollar, down 0.2% on day.
Rising inflationary risk over the prolonged West Asia conflict pushed Brent prices to $104/bbl, and the dollar index firmed to a two-month high of 101.11, adding to the downside for the local currency. A firm greenback reduces the appeal of emerging market currencies for foreign investors.
Traders cited by Reuters said that state-run banks carried out dollar sales on behalf of the Reserve Bank of India to prevent the currency from weakening beyond the 96 mark against the US dollar.
Strong US data and treasury yield add to declines
S&P Global data showed US private-sector activity jumped to its highest level in more than five years, while services and manufacturing also showed improvement, adding to inflationary concerns. Inflation continues to hold above the US Federal Reserve’s target of 2%.
Following this, the yield on the 10-year US Treasury note climbed to 5%, its highest level since 2007, while Japan’s 10-year bond yield climbed to levels last witnessed in August 1996. Higher yields on developed market bonds increase the appeal of safer assets like US Treasuries.
“After the September Fed hike, we retain our out-of-consensus call for two more rate increases in October and December. Whereas hikes looked politically challenging for (Fed Chair) Warsh a few months ago, they now appear politically expedient,” Reuters quoted BofA Global Research as saying in a note.
Markets currently price in a 75% probability of a 25-basis-point rate hike by the Fed in October, up from 55% reported a week ago and 11% a month ago.
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Domestic indices under pressure
Indian benchmark indices turned bearish on Thursday as both indices were down by more than 1.6%, reversing the previous session’s gains. Headwinds caused by global cues added to the selling pressure. The BSE Sensex fell 1.67% or 1,247.71 points to 73,580.54, while Nifty 50 cracked to 23,063.10, down 383.70 points or 1.64%. Big volatility was witnessed in the markets.
” With US yields up at 5.145% it is a very clear path for Currencies, Commodities and Equities that they will all fall,” said Anil Kumar Bhansali, head of treasury at Finrex Treasury Advisors.
Outlook for Rupee
“The rupee is likely to remain under pressure amid elevated crude and dollar strength. Rupee range can be seen between 95.45–96.25, with the broader weakness intact as long as it remains below the 95.00 level,” said Jateen Trivedi, VP Research Analyst – Commodity and Currency, LKP Securities
TOPICSBrent crudeBSE SensexCrude oilFalling Rupee ValueIndian rupeeNSE NiftyrupeeRupee vs us dollarUS Federal ReserveUS Treasury YieldsWest Asia + 0 MoreThis article was first uploaded on September twenty-four, twenty twenty-six, at zero minutes past three in the afternoon. © IE Online Media Services (P) Ltd