In early trading on Thursday, the Indian rupee displayed slight weakness, attributed to concerns arising from the surge in U.S. Treasury yields following a more hawkish stance by the Federal Reserve, according to traders.
At 11:15 a.m. IST, the rupee stood at 83.0975 compared to the previous session’s rate of 83.0725. Notably, exporters who had been relatively inactive are expected to become more engaged at current exchange levels, as suggested by a foreign exchange sales executive from a private bank.
However, market observers anticipate that the USD/INR currency pair will continue to have a bias toward “buy on dips,” as indicated by a forex trader at a private bank. The rupee’s counterparts in the Asian region also experienced weakening as U.S. Treasury yields surged following the Federal Reserve’s hawkish stance. The Fed’s summary of economic projections (SEP) featured a median dot plot revealing expectations of a 50 basis point rate hike in 2024, down from the 100 basis points projected in June by officials.
Both short-term and long-term U.S. Treasury yields reached multi-year highs in Asian trading, with the 2-year yield reaching 5.20% and the 10-year yield climbing to 4.44%. Concurrently, the dollar index achieved a six-month peak.
Despite concerns that the rupee may touch a historic low against the dollar, intervention by the Reserve Bank of India has helped prevent such a decline, demonstrating the central bank’s commitment to stabilizing the currency’s exchange rate.