The Indian rupee is expected
to start Tuesday little changed, with the central bank’s
persistent intervention and favourable near-term momentum
helping offset the drag from rising U.S. Treasury yields and
higher oil prices.
The rupee is expected to open in the 95.14-95.18
range according to traders, after settling at 95.1625 to the
dollar on Monday. The currency rose 0.2% on Monday to a near
four-week high, surprising most market participants.
Flow- and position-related dollar selling pushed the rupee
towards the higher side of its 95.00-95.80 expected near-term
range, a move that was “definitely not expected” especially with
oil prices around $90 a barrel, a currency trader at a bank
said.
While the rupee could make a further push higher at the
open on the back of its momentum, such momentum-driven moves
have not tended to sustain in the past, the trader said. He
added that importers are likely to step up their hedging at
current levels.
India’s robust GDP numbers “are certainly helpful, though
only at the margin,” he said.
Meanwhile, traders will assess the impact of the Reserve
Bank of India’s ballooning FX forward book, which hit an
all-time high of $137 billion in July amid the central bank
swapping FCNR(B) deposits raised by banks.
Economists have pointed out that the size of the forward
book leaves less room for sustained appreciation in the rupee,
with the RBI eventually having to buy dollars to reduce its
outstanding position.
U.S. YIELDS, OIL HEADWINDS
U.S. Treasury yields rose to their highest since January
2025 on Tuesday amid renewed attacks between the United States
and Iran, which lifted oil prices and stoked inflation concerns.
The yield on the 10-year Treasury note was 2 basis points
higher at 4.778%, near a one-and-a-half-year high.
Oil prices rose on Tuesday following the resumption of
fighting between the United States and Iran in the Middle East.
Brent crude climbed to $91.14 a barrel.