Indian rupee pressured by US yields, euro-led dollar strength; RBI acts as buffer

Business Recorder reported that the rupee may begin Tuesday on a softer note, pressured by higher long-dated US Treasury yields and a dollar lifted by weakness in the euro. Traders see the currency opening between 96.32 and 96.34 per dollar, after it closed Monday at 96.2925. Market participants also expect the Reserve Bank of India to keep cushioning the slide.

The rupee has been under strain for the past month as elevated oil prices, rising US yields and foreign equity outflows added to dollar demand. It sits roughly 0.6% away from its record low near 96.96, a level touched in May. A bank currency trader said a move to 97 looks like a matter of time, while adding that the RBI may not defend any single level if pressure persists.

The Reserve Bank of India has been selling dollars more often whenever the rupee faces strain, which has slowed the pace of its fall. Elsewhere, the dollar index has moved above 102, near its strongest since April last year, as a weaker euro and rising longer-dated US yields lifted it. The 10- and 30-year Treasury yields have touched fresh 24-year highs, and resilient US services activity in August along with a jump in input prices has added to inflation concerns.