Rupee declines 0.5 per cent to 96.3150 against the U.S. dollar as rising borrowing costs, foreign investor outflows and higher crude prices pressure Indian markets.
The Indian rupee fell to its weakest level in two months on Thursday, October 1, as surging global bond yields, rising oil prices and continued foreign portfolio outflows intensified pressure on the currency.
The rupee closed 0.5 per cent lower at 96.3150 against the U.S. dollar, marking its steepest single-day decline in more than two months. The currency breached the key 96-per-dollar level, although dollar sales by state-run banks helped limit further losses.
Global borrowing costs climbed sharply, with government bond yields in the United States, France, Britain and Japan reaching multi-decade highs. The benchmark 10-year U.S. Treasury yield rose to 5.34 per cent, its highest level since 2002, raising concerns about government finances and global financial markets.
Meanwhile, Brent crude climbed back above $100 per barrel after China reportedly suspended exports of refined petroleum products, adding to concerns over global fuel shortages.
The combined pressures pushed Mumbai stocks down approximately one per cent, while India’s benchmark 10-year government bond yield reached its highest level in more than two years.
In a report released Thursday, the Indian government warned that supply disruptions, volatile energy prices and global economic uncertainty could pose near-term risks to inflation, the rupee and capital flows.
Currency market pressures have also created an imbalance between exporters and importers. Exporters remain hesitant to hedge their foreign currency earnings, while importers continue to secure dollar coverage.
Foreign exchange advisory firm IFA Global recommended that exporters hedge cautiously against confirmed orders, while importers consider hedging when the dollar-rupee exchange rate declines.
Elsewhere, Asian currencies weakened between 0.1 and 0.4 per cent, while the U.S. dollar index gained 0.5 per cent to approach 102.
Investors are now awaiting Friday’s U.S. labour market report for further indications of the global economic outlook. Indian financial markets will remain closed for a local holiday.
