MUMBAI: The Indian rupee ended lower on Monday, tracking a fall in the Chinese yuan, while surging U.S. yields weighed on rupee forward premiums.

The rupee closed at 82.6250 to the U.S. dollar, compared to 82.5750 on Friday. The local currency hit a more-than-one-week high of 82.52 earlier in the session.

The offshore Chinese yuan fell to 7.09 to the dollar on Monday. The yuan hit its lowest since Nov. 22 last week on concerns about China’s economic growth, and has seen multiple interventions from the Chinese central bank.

The dollar index stood firm at 104.24. It registered its third straight weekly gain last week and has risen nearly 2.5% so far this month.

“The prevailing strength of the U.S. dollar is expected to keep the rupee lower,” said Anindya Banerjee, head research – FX and interest rates at Kotak Securities.

India bond yields flattish with focus on US Treasury moves

Meanwhile, the rupee forward premiums fell, weighed down by a jump in U.S. yields. The one-year implied yield dropped to 1.73%, the lowest since December 2022.

Traders and analysts say the drop in premiums is mainly due to the absence of the Reserve Bank of India in the forward market.

U.S. Treasury yields surged as expectations that the U.S. Federal Reserve will raise interest rates in June were heightened following the U.S. debt agreement.

The probability of a Fed rate hike in June has risen to nearly 66%.

“Hawkish Fed speaks, better-than-expected U.S. growth and slowing growth momentum elsewhere in Germany, China may still support the USD momentum in the interim,” OCBC analysts said in a note.