Rupee's faltering rally faces returning oil pressure, surging US yields
The Indian rupee's faltering rally faces further challenges on Friday, as rising oil prices revive a key source of pressure and surging US yields bolster the dollar.
The rupee is expected to open weaker than the 94-per-dollar mark and remain under pressure, after falling below it on Thursday in its biggest daily decline in nearly three weeks.
The external backdrop is turning less favourable for the rupee, which has now faced resistance at the 94-per-dollar mark for three straight sessions.
Brent crude, which had fallen below $90 a barrel earlier this week, climbed to $96, after fresh attacks on Saudi energy infrastructure and disruptions to shipping through the Strait of Hormuz.
Meanwhile, the 10-year US Treasury yield rose well above the 5% mark after President Donald Trump said the United States did not need a deal with Iran.
US Treasury yields have climbed sharply in recent sessions after higher-than-expected US inflation data strengthened expectations of further Federal Reserve rate hikes.
Markets are fully pricing in a 25-basis-point Fed rate hike in December, with a small probability of a larger 50-basis-point increase.
The worries over oil prices and US Treasury yields come at a time when the rupee's recovery is already facing resistance.
Thursday's session offered evidence of that, with the currency climbing to an intraday high of 93.60 before coming under pressure and slipping past the 94-per-dollar mark.
Bankers said the rupee's inability to extend its rally in recent days despite robust equity inflows has fuelled speculation that the Reserve Bank of India may be buying dollars, while oil companies could be returning to the spot market to meet their dollar requirements.
