Key Takeaways
- Indian rupee expected to open weaker due to US Treasury yields and euro-led dollar strength.
- Reserve Bank of India continues to intervene to stabilize the currency.
- Dollar index near highest level since April last year, supported by euro weakness and rising US yields.
The Indian rupee is expected to open mildly weaker on Tuesday, influenced by a rise in long-dated US Treasury yields and the euro-led dollar strength, according to market traders.
The rupee is anticipated to open in the 96.32-96.34 range, having settled at 96.2925 to the dollar on Monday. It has been under pressure over the past month, with the currency now about 0.6% from its all-time low of near 96.96 hit in May.
Traders and analysts predict that the rupee could weaken further, with one trader at a bank stating, 'The way things are, it’s only a matter of time before we see 97.'
The Reserve Bank of India (RBI) has been increasingly active in the market, selling dollars when the rupee comes under strain and helping to temper the pace of its decline.
The RBI’s actions are seen as a buffer to mitigate the impact of external pressures, but some traders believe the central bank may not necessarily draw a line at a particular level if underlying pressures persist.
The dollar index has climbed past 102, supported by weakness in the euro and rising longer-dated US Treasury yields, hovering near its highest level since April last year.
The euro has been weighed down by political uncertainty and fiscal concerns across the euro zone, while the 10- and 30-year Treasury yields have hit fresh 24-year highs with the recent selloff in bonds persisting.
Data released on Monday showed US services-sector activity remained broadly resilient in August, adding to upward pressure on yields. The survey’s measure of prices paid by businesses for inputs also jumped during the month, suggesting inflationary pressures may prove more persistent.
The way things are, it’s only a matter of time before we see 97.
A currency trader at a bank, Bank trader
