Daijiworld Media Network- Mumbai
Mumbai, Jan 9: The Indian rupee hit a lifetime low on Thursday, pressured by rising U.S. bond yields and strong demand for dollars in the non-deliverable forwards (NDF) market, as traders speculated that the central bank stepped in to limit further losses.
The rupee weakened to 85.93 per US dollar, surpassing its previous record low of 85.8575 set in the last session. As of 9:45 a.m. IST, the currency was trading at 85.92.
State-run banks were seen offering dollars, likely on behalf of the Reserve Bank of India (RBI), which helped curb the rupee’s losses, according to four traders interviewed by Reuters.
A trader at a private bank noted that the RBI is “active as usual,” which could support the rupee in maintaining levels above 86 in the near-term.
The dollar index stood at 109 after rising 0.3% on Wednesday, while Asian currencies showed mixed performance.
The 10-year US Treasury yield reached a high of 4.73% on Wednesday, its highest since April 2024, before edging lower during Asian trading hours.
Concerns about inflation due to potential rate cuts by the Federal Reserve, influenced by U.S. President Donald Trump’s policies, have driven the dollar and U.S. bond yields higher in recent weeks.
Uncertainty surrounding Trump’s policies has created a cloud over the economic outlook, with U.S. central bank officials expressing new concerns about inflation in the minutes of the December Fed meeting released on Wednesday.
DBS Bank stated, “With Trump’s tariffs set to take effect at the start of his second term in less than two weeks, alongside a resilient US economy compared to a sluggish Chinese economy and stagnation in the Eurozone, the FOMC minutes should support the USD’s Trump Trade rally into this year.”
Additionally, dollar-rupee forward premiums surged, with the 1-year implied yield reaching 2.74%, its highest since October 2022.
This rise in forward premiums stems from a persistent arbitrage between dollar-rupee outright and non-deliverable forwards, according to traders.