A spike in the benchmark US Treasuries that led to a tumble in domestic equity indices also weighed heavily on the rupiah. The Nifty fell 1.07% to 18,113, making it the worst fall of 2022. India’s government bond yield was largely unchanged, however, with the benchmark bond at 6.10% closing the day at 6.63% against 6.64% a day before. .
“The rupiah may depreciate further due to the cocktail of higher oil prices and rising real yields. It may see levels of 75.30/50 in the medium term,” said Anindya Banerjee, currency analyst at Kotak. Securities.
The local currency opened lower at 74.38 from Monday’s close at 74.24 to the dollar and remained under pressure for most of the trading session.
“Rising oil prices will rekindle inflation risks and concerns about high trade deficits in the country,” said Sriram Iyer, senior research analyst at Reliance Securities.
Markets around the world remained weak as the yield on 10-year US Treasuries jumped to 1.83%, the highest in two years, amid fears the Fed would hike rates faster to curb the Rising inflation in the United States gripped traders.
If US Treasury yields continue to rise, India’s benchmark cannot escape it, said Ajay Manglunia, managing director and head of fixed income at JM Financial.
“Rising global yields, crude prices and fear of inflation have been under heavy pressure and local bond yields are likely to follow a northerly trip in the coming days ahead of the budget which decides on borrowing for the next fiscal year. “, did he declare. .
Dollar rates, on the other hand, have been supported as market participants reassess how far the Fed should act to rein in inflation, DBS Group research said in a note.
“It has become increasingly difficult for the Fed to justify short zero rate floors as the CPI turns 7% YoY in December. Now there seems to be an outside chance that the Fed wants to act a bit more aggressively early in the tightening cycle. This could take the form of a full end to quantitative easing in January, instead of waiting until March,” DBS said.