The day began with the Indian rupee showing weakness as a result of worries about increasing US Treasury yields, but it was able to make a partial recovery with the help of timely support from public sector banks.
Opening at 83.42 against the US dollar, the rupee then dropped to 83.4150 before settling at 22.729 against the UAE dirham.
A foreign exchange salesperson at a major bank reported that public sector banks were observed selling dollars, contributing to the strengthening of the rupee. It is uncertain whether this action was carried out on behalf of the Reserve Bank of India (RBI) or for their clients, but it did alleviate the strain on the currency.
Traders dealing with currency are familiar with the RBI’s consistent intervention and anticipate the central bank’s involvement at specific points to avoid a steep decline in the value of the rupee. It is widely anticipated that the RBI will not permit the rupee to drop below the 83.50 threshold.
Not as lucky were other Asian currencies, such as the Thai baht and Indonesian rupiah, which both lost 0.4%, and the Korean won, which dropped by over 1%. Due to worries about a mismatch between supply and demand, US Treasury rates increased, which put pressure on Asian currencies and reduced demand for riskier assets.
After two lackluster auctions, the yield on the US Treasury’s 10-year note has increased by 16 basis points in only two days. The rupee’s recent fall has been attributed to a number of factors, including importers prioritizing safety over risk, concern about the results of the Indian elections, and the withdrawal of short dollar bets.
For traders and investors, the rupee’s modest rebound is a pleasant break in spite of this. The Indian economy depends on the currency’s stability, and any large swings might have far-reaching effects.
