Indian rupee drops to two-month low as global bond rout deepens, oil jumps

The Indian rupee slid to its weakest point in two months on Thursday, closing 0.5% lower at 96.3150 per dollar, according to Business Recorder. The currency broke through the 96 level, a psychological marker, though sales of dollars by state-run banks cushioned the decline. Foreign portfolio outflows had already weighed on it earlier in the session.

Borrowing costs in several major economies climbed to their highest levels in decades, with the US 10-year Treasury yield reaching 5.34%, its loftiest reading since 2002. Brent crude moved back above $100 a barrel after China halted exports of oil products, a step that could further strain fuel markets already short of supply. Stocks in Mumbai fell about 1%, while the 10-year domestic bond yield rose to its highest level in over two years.

An Indian government report warned that supply shocks, swings in energy prices and wider global uncertainty could weigh on inflation, the rupee and capital flows in the near term. Exporters have been slow to hedge their receivables, whereas importers continue to hedge actively, widening the gap between demand and supply in the currency market. Investors now await a US labour market report due on Friday, and Indian financial markets will close for a local holiday.