Rising US yields, oil headwinds put RBI's Indian rupee 96 buffer to the test

Business Recorder reported that the Indian rupee could weaken at Tuesday's opening, as higher US yields and crude prices add pressure and raise the risk of a slide past the 96-per-dollar level. Traders expect the currency to open between 95.99 and 96.02 per dollar, after it closed at 95.9825 on Monday. The 96 mark is seen as a key near-term support point.

The Reserve Bank of India may be reluctant to let the rupee move through that threshold and could step up its market intervention, which has been close to daily in recent weeks, according to market participants. Analysts pointed to greater firepower for the central bank, helped by a recent rise in foreign exchange reserves linked to special measures introduced by the RBI. A currency trader at a bank said the central bank's intervention appears certain, with the open question being whether it defends levels or lets the rupee adjust more.

In the United States, Treasury yields rose on Monday as higher oil prices revived worries about sticky inflation and further Federal Reserve rate increases. The 10-year yield gained 6 basis points to 5.24%, near its highest level in almost two decades. Markets now put the chance of another Fed hike in October at roughly 70%, compared with under 20% a month earlier.