The Indian rupee is set to see slight relief after its worst trading day in three weeks. A decline in U.S. Treasury yields and a stable dollar are supporting the currency’s rebound. According to the 1-month non-deliverable forward, the rupee will likely open at 87.14-87.16 per U.S. dollar. This is an improvement from Tuesday’s closing level of 87.21.
On Tuesday, the rupee fell by 0.6%, mainly due to strong dollar demand linked to the expiry of derivatives contracts. The Reserve Bank of India intervened to limit losses and maintain stability. Despite the intervention, traders expect the rupee’s downward trend to continue. A currency trader noted that after such a sharp decline, hesitation in pushing the rupee further down is expected. However, he also suggested that the rupee could soon reach 87.50 per U.S. dollar.
The Indian rupee's slight relief comes as U.S. Treasury yields continue to decline. On Tuesday, the 10-year yield dropped to its lowest level in over two months. Currently, it is 50 basis points below its January highs and close to pre-U.S. election levels.
Investors are moving into U.S. Treasuries due to signs of a slowing U.S. economy and uncertainty surrounding tariffs. President Donald Trump recently suggested another one-month delay on tariffs for Mexico and Canada, easing short-term concerns. However, analysts at MUFG Bank warn that the market may be underestimating the risk of further U.S. tariff actions.
As U.S. yields decline, the dollar index has retreated from recent highs. This benefits emerging market currencies like the rupee. However, analysts caution that the rupee’s gains may be limited, given the broader trend of depreciation.
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The Indian rupee sees slight relief after a major selloff amid U.S. yields down. Analysts warn of limited gains as broader trends remain low.
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