Rupee slips to 94.20 per dollar as US yields and Fed hike bets climb

what happened

According to Moody's, the rupee lost 8 paise on Friday to close at 94.20 against the dollar (provisional). A firmer greenback and weakness in domestic equities weighed on the currency.

The dollar gained after US inflation came in above expectations, Treasury yields climbed and Federal Reserve officials took a hawkish tone. The dollar index stood at 103.16. CR Forex Advisors said markets are pricing an 85 per cent chance of a Fed rate hike in December. The US 2-year yield rose 13.96 bps to 4.867 per cent, and the 10-year yield climbed 12.39 bps to 5.113 per cent.

Brent crude fell 0.37 per cent to $95.47 a barrel. The Sensex dropped 318.56 points to 81,592.45, while the Nifty fell 155.05 points to 25,144.30.

why it matters

Higher US yields make American assets more attractive and support demand for the dollar, which could drive capital out of emerging markets. LKP Securities noted that foreign investors' steady buying provides some support for the rupee, with FIIs purchasing 12,563.33 crore rupees of equities on Wednesday.

market impact

Rupee and Indian markets: a stronger dollar and rising US yields pressure USD/INR and local stocks

• ▼Rupee (USD/INR) pressure down — a stronger dollar and rising US yields draw demand toward US assets
• ▲Dollar (DXY index) pressure up — expectations of a Fed rate hike and higher Treasury yields lift the greenback
• ▼Indian equities pressure down — capital outflows and weak domestic sentiment pressure the Sensex and Nifty

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