The Indian rupee faced a decline on Tuesday, in line with other Asian currencies. Additionally, elevated U.S. Treasury yields added to the pressure on the rupee, bringing it close to crucial support levels.
The USDINR pair was trading at 83.2250 against the U.S. dollar at 10:55 a.m. IST, a slight drop from the previous session’s 83.1450.
Meanwhile, the 10-year U.S. Treasury yield surged to 4.56% during Asian trading hours, reaching its highest point since October 2007. The dollar index (DXY) remained near its peak levels since November 2022, currently quoted at 106.05.
According to a foreign exchange trader at a state-run bank, “Looking at the dollar index, the rupee would have gone beyond 83.30.” It’s worth noting that the rupee’s all-time low of 83.29 was recorded in October 2022.
U.S. Treasury yields climbed in response to some hawkish comments from Federal Reserve officials, aligning with the central bank’s commitment to higher interest rates for an extended period.
However, there appears to be limited interest in buying or selling dollars at this price point, as observed by another foreign exchange trader at a state-run bank.
Concerns about potential intervention by the Reserve Bank of India (RBI) may also be deterring some market participants from taking significant positions.
The rupee’s Asian counterparts mostly experienced declines, with the Korean won leading the losses with nearly a 1% drop.
In the energy sector, Brent crude oil futures declined to $92.89 due to concerns that major central banks maintaining higher interest rates could dampen fuel demand.
Arnob Biswas, head of foreign exchange research at SMC Global Securities, noted, “Speculative longs (on USD/INR) are dry around this zone,” indicating limited enthusiasm to push the rupee lower.
Adding to the rupee’s challenges, equity-related outflows have weighed on the currency in September. Foreign investors have divested approximately $1.3 billion in equities so far, potentially ending a six-month buying streak.