The Indian rupee is expected to open unchanged, as non-deliverable forwards indicate that the USDINR will remain at around 83.12-13 to the U.S. dollar. However, the currency is likely to remain under pressure due to dollar demand at the end of the month. Additionally, the 10-year U.S. treasury yield has climbed above 4.55%, its highest level since October 2007, leading to expectations that the U.S. Federal Reserve will keep interest rates higher for longer. Minneapolis Federal Reserve Bank President Neel Kashkari stated on Monday that if the economy is much stronger than previously thought, rates may need to be held higher for longer to cool things off. The dollar index has climbed to its highest level since November last year and is currently quoted at 106.
Despite exhibiting higher resilience than most of its Asian peers, the Indian rupee’s strength is becoming less supportable. ING bank warns that the INR’s resilience is now questionable. However, the Reserve Bank of India has ample ammunition to support the currency if it decides to do so. Additionally, investors are eagerly awaiting the decision on whether India will be included in the FTSE Emerging Markets Government Bond Index, which is due on September 28.
Key takeaways:
- The Indian rupee is expected to open unchanged at 83.12-13 to the USD, but may remain under pressure due to month-end dollar demand
- The 10-year U.S. treasury yield is at its highest level since October 2007, leading to expectations that the Fed will keep interest rates higher for longer
- The dollar index has climbed to its highest level since November last year at 106
- ForExim Analysts warn that the INR’s resilience is becoming less supportable, but the RBI has enough ammunition to support it if necessary.
- Investors are waiting for the decision on whether India will be included in the FTSE Emerging Markets Government Bond Index on September 28.