Rupee's faltering rally faces returning oil pressure, surging US yields
TLT•The rupee is expected to open weaker than 94 per dollar as Brent crude rises to $96 a barrel and the 10-year US Treasury yield climbs above 5%.
1. Rupee faces pressure
The Indian rupee is expected to open weaker than 94 per dollar on Friday after falling below that level on Thursday, its biggest daily decline in nearly three weeks. It has faced resistance at 94 per dollar for three straight sessions.
2. Oil and yields rise
Brent crude climbed to $96 a barrel after attacks on Saudi energy infrastructure and shipping disruptions through the Strait of Hormuz. The 10-year US Treasury yield rose well above 5% after President Donald Trump said the United States did not need a deal with Iran; higher-than-expected US inflation has strengthened expectations of further Federal Reserve rate hikes. Markets are fully pricing in a 25-basis-point rate hike in December, with a small probability of a 50-basis-point increase.
3. Recovery meets resistance
The rupee reached an intraday high of 93.60 on Thursday before slipping past 94 per dollar. Bankers said its inability to extend its rally despite robust equity inflows has fuelled speculation that the Reserve Bank of India may be buying dollars and oil companies may be returning to the spot market to meet their dollar requirements.
