Indian rupee to rise after US yields reverse inflation-led spike, Fed hike bets remain low

According to Business Recorder, the Indian rupee is expected to strengthen when trading opens on Thursday, supported by a retreat in US Treasury yields after an early climb caused by stronger-than-expected inflation data. Dealers quoted an opening band of 95.02 to 95.06 against the dollar, following a close of 95.15 on Wednesday. Traders still price in only a small chance that the Federal Reserve raises rates again in October.

The spotlight, according to the report, rests on the Reserve Bank of India and how far it will go to defend the currency. The central bank has already restricted dollar purchases through several measures and then sold dollars directly. A bank currency trader described the RBI's message as clear, but questioned how much room the market will give the authority. He also observed that the rupee's rally ran into resistance past the 95 level on Wednesday.

Yields had jumped after September's US inflation figures came in above expectations, sending bets on a Fed hike up sharply this month. That move then reversed, which analysts linked to risk aversion. Morgan Stanley highlighted flows tied to real-money and fast-money participants as a driver of the pullback.