MUMBAI: The Indian rupee is expected to decline at the open on Tuesday, weighed down by a further rise in US Treasury yields amid increasing expectations of Donald Trump winning the US presidency.
Non-deliverable forwards indicate the rupee will open at 83.47-83.48 to the US dollar, compared with 83.4375 in the previous session.
Asian currencies were down between 0.1% and 0.5%, with the offshore Chinese yuan dipping below 7.3050 to the US dollar. In line with Asia, the rupee will “have it difficult” today, a currency trader at a bank said.
“Now we are back to watching the 83.50-83.55 resistance (on dollar/rupee).”
The 10-year US yield climbed to nearly 4.50% in the New York trading session on Monday, its highest level in a month.
The increasing likelihood that Trump will prevail in the November election is prompting investors to demand higher yields on US Treasuries.
Following US President Joe Biden’s debate performance last week, which was widely criticized, the probability of a Trump presidential win has climbed to 60%, per political betting website PredictIt.
“Market participants (are) pricing in fiscal concerns and higher inflation given potential election outcomes,” Morgan Stanley said in a note.
Elections are taking centre stage, with increased focus on outcomes and political uncertainty continuing to drive price action, Morgan Stanley said, referring to the US and French elections.
Indian rupee to focus on US data after index flows underwhelm
The jump in US yields comes despite weak US manufacturing data on Monday.
The Institute for Supply Management’s reading showed US manufacturing contracted for a third straight month in June. Focus now turns to Federal Reserve Chair Jerome Powell’s speech later in the day.
After that, the minutes of the last Fed meeting are up on Wednesday and then the monthly US jobs report on Friday.
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