By Anushka Trivedi
MUMBAI (Reuters) – The Indian rupee slipped on Thursday against a steady greenback that found support from minutes of the U.S. Federal Reserve’s last meeting that hinted higher interest rates could stick for longer.
The partially convertible rupee ended at 79.6725, having flirted with the key 79.70 level occasionally during the session. The local unit had closed at 79.4450 on Wednesday.
Traders widely expect the rupee to tread the 79-80 range for at least another week, with no major events around the corner.
“Within that broad range, there is choppiness depending on sentiment. A 25-30 paise broad move one day gets covered the next day, so within this range there’s volatility,” Gaurang Somaiya, an analyst at Motilal Oswal said.
Overall mood was quite sombre in Asian emerging markets as the region’s economic engine China’s currency continued its poor run with a 0.2% decline to a three-month low. [CNY/] [EMRG/FRX]
The yuan is down 0.7% so far this week after the People’s Bank of China slashed interest rates on Monday slammed by harsh COVID-19 lockdowns and a crisis in the property market that hit consumer and business confidence.
Continued capital outflows from Chinese markets and flare-ups between Washington and Beijing are a potential threat to the rupee as investor sentiment towards Asia could decline in the backdrop of a resurgent dollar, said a trader at a private bank.
Falling oil prices were no respite to the rupee on Thursday as the dollar climbed to a three-week high after minutes released overnight from the Fed’s July meeting showed officials found “little evidence” of inflation pressures easing.
The minutes flagged an eventual slowdown in the pace of hikes, but not a sharp switch to cuts in 2023 that traders were pricing in to interest-rate futures.
Meanwhile, the benchmark 10-year government bond yield rose to 7.2421%, as traders took profits on recent gains heading into the auction of a new 10-year note due Friday. [IN/]
(Reporting by Anushka Trivedi in Mumbai)
