Indian rupee to slip on rising US yields, dollar

India’s rupee is expected to depreciate on Thursday after US Treasury yields climb further, Reuters reported.

Non-deliverable forwards indicate the rupee will open between 83.36 and 83.38 per US dollar, compared to Wednesday’s close of 83.3450.

This follows three consecutive days of losses for the rupee, with Wednesday marking its worst performance in seven weeks.

The rupee is declining due to unwinding of short dollar/rupee positions, increased import demand, and overall weakness in Asian currencies.

Several factors are contributing to the rupee’s decline. A forex trader said that playing a range of 83.00-83.50 and buying/selling near the top or bottom of this range continues to be a successful strategy, adding a new trading range is likely to emerge after the election results are announced.

The increase in US Treasury yields is boosting the dollar, driven by concerns about government debt issuance. The 10-year yield has risen 16 basis points in the last two days amid worries about high government debt issuance.

The two-year yield hit five per cent in US trading on Wednesday, reflecting market expectations of slightly more than one interest rate hike by the Federal Reserve this year.

Lloyd Chan, an analyst at MUFG Bank, predicts that increasing US yields will lower demand for Asian currencies. The market will now turn its attention to US weekly initial jobless claims data for insights into potential labour market weakness.