Rupee to benefit from dollar retreat, plunging US yields; oil surge tempers impact
The Indian rupee is likely to draw support from a retreat in the dollar and a plunge in US Treasury yields at Friday's open, although another surge in oil prices could still weigh on the currency.
The rupee is expected to open flat to marginally higher, per traders, having settled at 95.26 to the dollar on Thursday.
A fresh bout of AI-related jitters sparked a flight to safety in markets, driving investors into US Treasuries, pushing the two-year yield down 8 basis points to its lowest level in seven weeks. The 10-year Treasury yield slipped to 4.90%, down 46 basis points from its recent peak.
The dollar, however, failed to benefit from safe-haven demand, with the dollar index falling to 101.70 with the decline in US yields weighing on the currency. Asian currencies traded flat to modestly higher.
RISK AVERSION ON AI WORRIES
US equity indexes fell on Thursday, while futures pointed to further losses on disappointing earnings from major technology companies that brought back into focus questions over whether massive investments in artificial intelligence will pay off.
Asian equities tracked US shares lower, with the steepest declines in markets with higher exposure to the AI trade.
Adding to the risk-averse mood in Asia was a fresh surge in oil prices amid concerns over supply disruptions after Yemen's Iran-aligned Houthis stepped up attacks on Saudi Arabia. Brent crude futures climbed to a high of $117.84 a barrel.
For the rupee, any support from the decline in US yields is likely to be limited since it is primarily driven by a flight to safety, a currency trader at a private-sector bank said.
The jump in oil prices will more than offset that relief, he added, while emphasising that the rupee's ability to find support will once again depend heavily on the Reserve Bank of India's intervention in the market.
