Analysts said regional currencies also firmed on rising expectations on an interest rate cut by the US Federal Reserve this month. The bets further strengthened after data released on Wednesday showed US retail sales falling for the first time seven months in September. Indian rupee and the Indonesian rupiah,the two high yielding currencies, also strengthened on the day due to a sharp fall in US bond yields.
On the other hand, China's yuan edged lower against the US dollar after the central bank set a weaker daily reference rate for the currency. The Indian rupee rose 0.16% against the dollar on Thursday helped by weaker oil prices, lower US bond yields and strong domestic equities. However, some analysts said falling real yields of Indian bonds could affect the rupee, along with other concerns such as fiscal deficit and lower liquidity in the banking system.
India's real yields have fallen nearly 200 basis points since the start of this year, according to Refinitiv data. Real yields are nominal yields adjusted for inflation. "Rupee could suffer the double whammy of growth dent as well as pressures from capital pulling out of equities in response to downbeat growth prospects," said Vishnu Varathan, head of economics and strategy for Mizuho Bank in Singapore in a note.