IGI Logo

The Indian rupee could open near its record lows on Wednesday as rising crude prices and elevated U.S. Treasury yields mount pressure on the local unit.

Non-deliverable forwards (NDF) indicate rupee will open at around 83.25-83.26 to the U.S. dollar compared with the close of 83.23 in the previous session.

The rupee hit its lowest level on record - 83.29 - in October 2022.

However, the rupee could avert a fall to fresh record lows on likely help from the Reserve Bank of India (RBI). The central bank possibly sold dollars in the NDF market to aid the rupee, four traders told Reuters.

"Pre-open supply is also likely from the RBI," a foreign exchange trader at a foreign bank said, adding that the market expects the RBI to remain active near these levels. "If we break past 83.35 (on spot), there is no stopping then."

Brent crude oil futures rose to $94.76 and have climbed nearly 9% this month. Nomura estimates that for every $10 increase in oil prices, India's current account deficit worsens by 40 basis points of its gross domestic product.

The 10-year U.S. Treasury yield was lower in Asia at 4.51% but remained close to its highest level since October 2007. U.S. Treasury yields have been elevated following hawkish commentary from some Federal Reserve officials.

Minneapolis Federal Reserve Bank President Neel Kashkari said on Tuesday that he saw a 40% chance of the U.S. needing "meaningfully" higher rates to beat inflation.

Higher policy rates in the U.S. could hurt the rupee by further shrinking the U.S.-India rates spread.

"We can expect a strong intervention from the central bank to defend the rupee if it slips below 83.30 during opening hours," said Arnob Biswas, head of foreign exchange research at SMC Global Securities.

Asian currencies were mostly weaker with the Korean won leading losses. The dollar index was at 106.24, hovering close to its highest level since November 2022.

KEY INDICATORS:

** One-month non-deliverable rupee forward at 83.36; onshore one-month forward premium at 11.50 paisa

** USD/INR NSE October futures settled at 83.3850 on Tuesday

** USD/INR September forward premium at 11.5 paisa

** Dollar index up at 106.25

** Brent crude futures up 0.9% at $94.8 per barrel

** Ten-year U.S. note yield at 4.52%

** As per NSDL data, foreign investors sold a net $166.9 million worth of Indian shares on Sept. 25

** NSDL data shows foreign investors bought a net $7.6 million worth of Indian bonds on Sept. 25