Indian rupee to rise on dollar slump after Treasury boosts bond buyback; oil risk persists

Business Recorder reported that the Indian rupee is likely to start Thursday's session stronger, with traders expecting it to open between 95.62 and 95.66 against the dollar. The currency had closed at 95.7525 per dollar on Wednesday. The move follows a slide in the greenback to its weakest point in three months.

The dollar index fell 0.88 per cent on Wednesday, its steepest daily drop since mid-March, after the US Treasury said it would expand its liquidity support for longer-maturity bonds. That followed a selloff that pushed the 30-year Treasury yield to its highest level since 2007, as investors worried about inflation and sought a larger term premium. ING Bank observed that the purchases were in effect paid for through short-term debt sales, so analysts did not regard the step as quantitative easing.

Gains for the rupee may be capped because oil remains expensive, with Brent crude trading near $92 a barrel. Uncertainty over the US-Iran conflict and the safety of tankers passing through the Strait of Hormuz also keeps energy markets on edge. A bank currency trader said the wider fall in the dollar was unlikely to help the rupee much, expecting buyers to step in during the early dip and describing the underlying tone as bearish.