USD/INR Hits 95.85 as US Yields Peak at 5%
The Indian Rupee slides to 95.85 against the US Dollar. US Treasury yields reach a record 5.0%. Oil prices rise on supply fears.
The USD/INR exchange rate reached 95.85 in the opening session. The Indian Rupee continued its decline against the US Dollar. This movement followed the extension of the rally in US Treasury yields.
US 10-year Treasury yields hit a record high of 5.0%. This level was last seen in October 2023. The US Dollar Index rose 0.15% to 99.62. These factors combined to pressure the Indian currency.
Fed rate hike expectations firm
Market participants expect the Federal Reserve to hike rates on Wednesday. This view is driven by hotter-than-projected US PPI and CPI data. Investors await the policy statement for further guidance.
ING economists revised their outlook to a 25bp hike in September. They argue that one hike may be sufficient. Financial markets currently price in 2.5 additional hikes after the September move.
Oil supply concerns rise
Saudi Arabia closed a major pipeline following recent attacks. The MCX Crude Oil contract rose 1.8% to 9,900 rupees. This price is near the multi-month high of 10,043 rupees.
Deutsche Bank analysts note that these events raise supply security concerns. They also cite the postponement of Iran-Gulf talks. High oil prices disproportionately hurt import-dependent economies like India.
India inflation beats estimates
India’s retail CPI grew 4.82% year-on-year in August. This figure exceeded the 4.8% market estimate. The previous reading was 4.45%. The data remains within the RBI’s 2%-6% target band.
Faster inflation growth increases expectations for an RBI rate hike. Technical indicators show USD/INR trading above the 20-day EMA at 95.30. The RSI stands at 62.3, indicating firm upside momentum. GN auto markets/bonds: treasury yields reported these figures.
