Rupee warily eyes US yields, oil prices; banks on RBI help
The Indian rupee is expected to open little changed to the U.S. dollar on Thursday with rising U.S. Treasury yields and oil prices meeting expectations that the central bank will be there to defend the currency.
Non-deliverable forwards indicate the rupee will open nearly unchanged from Wednesday's level of 83.1325. Asian currencies were weak again with the offshore Chinese yuan dropping to 7.3280 to the dollar.
The 10-year U.S. Treasury yield was hovering near 4.30%, not too far from year-to-date highs.
Brent crude futures rose for the seventh straight session on Wednesday, reaching a high of $91.10. Brent crude, now up nearly 10% in two weeks, is at its highest since Nov. 2022
"With what U.S. yields and oil are doing, there is no doubt we should be much higher (on USD/INR)," a forex trader at a Mumbai-based bank said.
"But then there is RBI to take into account and traders know what happened last month."
Last month, when the rupee was at risk of making a record low, the Reserve Bank of India intervened in non-deliverable forwards and the over-the-counter onshore market.
Speculators who had taken long positions on the dollar had to exit due to the central bank's intervention, according to bankers.
Robust U.S. services data lifted U.S. yields on Wednesday. The U.S. Institute for Supply Management (ISM) said its non-manufacturing purchasing managers' index (PMI) rose to 54.5 last month, the highest reading since February and up from 52.7 in July.
A gauge of prices paid by services businesses for inputs increased from the prior month.
The ISM data drove the market to further price out easing by the Federal Reserve next year, ING Bank said in a note.
"Higher for longer US rates trade takes its toll on Asian FX," ING said.
KEY INDICATORS: ** One-month non-deliverable rupee forward at 83.24; onshore one-month forward premium at 8.75 paisa ** USD/INR NSE September futures settled on Wednesday at 83.19 ** USD/INR September forward premium at 5.5 paisa ** Dollar index at 104.88 ** Brent crude futures at $90.5 per barrel ** Ten-year U.S. note yield at 4.2950% ** As per NSDL data, foreign investors sold a net $158.1mln worth of Indian shares on Sep. 5
** NSDL data shows foreign investors sold a net $96.3mln worth of Indian bonds on Sep. 5
