Saturday, October 1

Rupee likely lower as US yields, dollar surge; oil, RBI eyed


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MUMBAI — The Indian rupee is expected to open lower against the US currency as Treasury yields and dollar index jumped on bets of the Federal Reserve tightening monetary policy aggressively.

The rupee is tipped at 79.88-79.90 in initial trades, compared with 79.8350 in the previous session.

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The offshore Chinese yuan extended its recent decline, slipping to 6.9850 to the dollar. The Korean won, the Thai baht and the Indonesian rupiah were down 0.3% to 0.6%.

In line with rest of Asia, rupee will open lower, but “as has been the case for several days, the losses will be very moderate,” a trader at a Mumbai-based bank said.

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A combination of lower oil prices, the psychological level of 80 and the Reserve Bank of India’s stance on the currency will “yet again make rupee an outperformer,” the trader said.

The dollar index on Tuesday climbed to 110.55, its highest level in over 20 years, while the 10-year Treasury yield surged 15 basis points after data indicated that the US economy was holding up well to the Fed rate hikes.

The Institute for Supply Management said its non-manufacturing PMI edged up, its second such increase in two months.

The data fueled speculation that the Fed could keep pushing interest rates higher to tamp down the runaway inflation. CME Group Fed Fund futures contracts indicate a near three-in-four chance of the US central bank raising rates by 75 basis points at the Sept. 20-21 meeting.

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Meanwhile, oil prices tumbled, weighed by the dollar’s strength and worries over demand.

Brent crude in Asia trading dropped to $91.70, the lowest level in three weeks. Shares in South Korea, Hong Kong and Japan declined at least 1.1% each. US equity futures extended losses.

KEY INDICATORS: ** One-month non-deliverable rupee forward at 80.14; onshore one-month forward premium at 21.7 paise ** USD/INR NSE September futures closed on Tuesday at 79.9525 ** USD/INR forward premium for current month is 14.5 paise ** Dollar index at 110.51 ** Brent crude futures down 1.3% at $91.6 per barrel ** Ten-year US note yield at 3.35%, India 10-yr bond yield at 7.18% ** SGX Nifty nearest-month futures down 1.1 % at 17,475 ** As per NSDL data, foreign investors bought a net $33mln worth of Indian shares on Sep. 5

** NSDL data shows foreign investors bought a net $15.4mln worth of Indian bonds on Sep. 5 (Reporting by Nimesh Vora; Editing by Dhanya Ann Thoppil)

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