Indian rupee to extend slide; oil rally, surging US yields chip away at RBI support

Business Recorder reported that the Indian rupee is set to extend its weekly decline at Friday's opening, as a firmer oil price and rising US Treasury yields revive risk aversion among investors. Traders expect the currency to open between 95.62 and 95.68 per dollar, having closed at 95.44 on Thursday. The rupee has shed about 1 per cent over the past three sessions, a fall that would erase much of the gain the Reserve Bank of India helped secure.

Brent crude jumped more than 6 per cent on Thursday and climbed toward $110 a barrel in Asian trade as attacks on key Middle East shipping routes intensified. The benchmark is up nearly 12 per cent this week, following an 8 per cent gain the previous week. A currency trader quoted in the report said the central bank appears reluctant to lean heavily against the rupee's weakness, and oil has become the main driver of the currency.

US producer prices for final demand gained 0.4 per cent last month after a revised 0.1 per cent rise in July, strengthening expectations of a Federal Reserve rate hike next week. Markets now put the odds of that move at about 70 per cent, pushing the 10-year Treasury yield close to 5 per cent. Asian equities fell sharply and most regional currencies weakened.