The Indian rupee on Friday (October 7) weakened past the 82 mark for the first time to hit a fresh record low against the US dollar amid a surge in crude oil and US bond yields.
At close, the domestic currency settled at 82.33 a dollar, down 0.54 percent against its previous close of 81.89. The currency opened at 82.19 and touched an all-time low of 82.42.
Globally, crude oil advanced past $ 95 a barrel, surging for a fifth straight session spurred by OPEC’s production cut. Brent crude rose over 7 percent in this period. The ten-year US treasury yields have jumped nearly 18 basis points since Tuesday.
“Well, if the oil again jumps above $ 100 per barrel, it will surely ring alarms and further stress the deficits and the rupee,” CR Forex said.
The Dollar Index bounced back from 109.80 levels to 112.12 in the last one month. Traders are now awaiting the US non-farm payroll and unemployment rate data due later on Friday.
According to CR Forex, the rupee fell sharply on Thursday (October 6) as it was rumoured that some nationalised banks bought dollars for defence-related payments. One foreign bank is estimated to have bought 1 billion USD, which weighed on the rupee in the offshore market, CR Forex said.
Traders now expect further tightening after two US federal reserve governors backed continued rate hikes to tame inflation. Overnight, US Federal Reserve governor Christopher Waller and Lisa Cook said the Fed needs to keep raising interest rates into early next year to bring down stubbornly high inflation, Reuters reported.
The sentiments were also weaker after the World Bank downgraded India’s economic growth forecast to 6.5% for FY23, citing the deteriorating international environment.
“We expect the Rupee to trade with a negative bias on risk aversion in the global market and overall strength in the US Dollar. However, inflows by foreign investors may support Rupee at lower levels. USDINR spot price is expected to trade in a range of Rs 81.50 to Rs 83 in the next couple of sessions,” said Anuj Choudhary – Research Analyst at Sharekhan by BNP Paribas.
Meanwhile, the 10-year bond yield hit a fresh four-month high to hit 7.518% — a level last seen on June 17. The bond yield advanced nearly 20 bps in the last seven sessions. The 10-year bond yield ended at 7.455% from its previous close of 7.452%. Both bond yield and prices move in opposite directions.
On Thursday, JPMorgan refrained from adding the Indian bonds to its emerging market debt index citing investment hurdles. Earlier this month, the London Stock Exchange Group which manages the FTSE indices said that it would continue to keep Indian bonds under watch for inclusion into the FTSE Emerging Markets Government Bond Index.
