USD/INR: Rupee falls as US bond yields hit 16-year highs

The USD/INR currency pair firmed on Tuesday, as a surge in US Treasury yields underpinned the US Dollar.

The Rupee retreated alongside other Asian currencies, with the South Korean Won leading losses.

A combination of resilient macro data, hawkish comments from Federal Reserve officials and a budget deficit to be funded through borrowing pushed the benchmark 10-year US Treasury yield up to 4.56% earlier on Tuesday, a level not seen since October 2007.

The US Dollar Index was last edging up 0.15% on the day to 106.110, after hitting its highest level since last November at 106.123 earlier in the session.

“From here it eyes levels around 107.20,” analysts at Australia’s Westpac Bank wrote in an investor note, cited by Reuters.

“Few currencies will resist the bullish dollar macro resiliency theme and the euro and Chinese yuan look more vulnerable than most.”

Futures markets are now pricing an almost 40% chance of another interest rate hike by the Federal Reserve by the end of the year.

Meanwhile, the Rupee has also been pressured by equity-related outflows in September, since foreign investors have so far sold equities worth $1.3 billion.

As of 7:54 GMT on Tuesday the USD/INR pair was edging up 0.14% to trade at 83.2225.

The Indian currency had registered a record low of 83.29 against the US Dollar in October 2022.