Indian Rupee Appreciates Slightly Against US Dollar

In early trading on Thursday, the Indian rupee displayed a narrow range and appreciated by 3 paise, settling at 83.25 against the US dollar (22.68 against the UAE dirham).

Interbank Foreign Exchange Rates:

At the interbank foreign exchange, the rupee opened at 83.26 against the dollar (22.69 against the dirham) and reached an early high of 83.25 (22.68), marking a 3-paise gain compared to its previous close.

Financial analysts are closely monitoring the currency’s performance, expecting it to face pressure due to several global economic factors. 

Of particular concern is the surge in long-maturity US Treasury yields to multi-year highs, driven by expectations of sustained high interest rates.

RBI’s Intervention:

The Reserve Bank of India (RBI) has been actively intervening in the currency market over the past few days to prevent the rupee from falling to a lifetime low.

A forex trader from a Mumbai-based bank stated, “Looking at how US yields keep marching higher and how oil prices are, you would have to at least consider the possibility that the RBI will relent. From what I have seen this week, odds of a new low (on rupee) are now higher.”

US Treasury Yields:

The 10-year US Treasury yield surged to 4.9550 percent in Asia, reaching a level not seen in 16 years. 

Federal Reserve officials have consistently expressed their intention to maintain high interest rates due to robust US economic performance, prompting investors to exit US Treasuries.

Federal Reserve’s Stance:

New York Fed president John Williams reiterated the central bank’s commitment to a restrictive monetary policy to control inflation. 

This stance has led to a shift in expectations among futures traders, with reduced bets on the Fed cutting rates late next year and an extended target rate projection of 5 percent or more through September 2024.

Strong US economic data, including better-than-expected retail sales figures, have contributed to the “high-for-longer rate outlook” for the US, which is impacting global financial markets.

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