The Indian rupee is on course
to open lower on Wednesday, pressured by a surge in oil prices
and rising U.S. Treasury yields, threatening to blunt the
momentum the currency has built with the central bank’s
intervention.
The rupee is expected to open in the 95.02-95.06
range, according to traders, after settling at 94.95 to the
dollar on Tuesday. The currency is on a three-day winning streak
after touching a two-month high of 94.80 on Tuesday.
The rupee’s rally has come despite multiple headwinds and
has been driven largely by aggressive intervention from the
Reserve Bank of India, with flow-related dollar selling by
foreign banks providing additional support, traders said.
In recent sessions, the rupee has been among the
better-performing Asian currencies.
The question now is whether the RBI will step in again and
absorb the pressure coming from higher oil prices, a currency
trader at a bank said.
At the moment, the central bank is effectively the only
meaningful dollar seller in the market, and without its
presence, it is difficult to see the rupee holding on to current
levels, he added.
The RBI’s intervention comes against the backdrop of a surge
in deposits from non-resident Indians, which has strengthened
its firepower. Inflows under the FCNR(B) scheme topped $100
billion by the Aug. 31 deadline for banks to raise deposits
eligible for concessional swaps with the RBI, the Financial
Express reported.
OIL, US YIELDS PRESSURE BUILDS
Oil extended its rally in Asian trading, with Brent futures
climbing to $95.50 a barrel after fresh exchanges of strikes
between the U.S. and Iran overnight heightened fears of supply
disruptions and dashed hopes of a near-term easing in Middle
East tensions.
The spike in crude prices reverberated through bond markets,
pushing U.S. Treasury yields to their highest levels since late
2023.