Rupee poised to test record low as oil prices, US yields climb

MUMBAI, Sept 28 (Reuters) - The Indian rupee is likely to open near its record low levels on Thursday with the surge in crude oil prices and rising U.S. treasury yields expected to hurt the local unit.

Non-deliverable forwards indicate rupee will open close to its record low against the U.S. dollar compared with a close at 83.22 in the previous session. The rupee had hit its lowest level on record - 83.29 - in October 2022

The rupee came close to testing its record lows on Wednesday as well but likely intervention from the Reserve Bank of India (RBI)helped avert the fall.

The markets focus will be on whether the RBI supplies dollars in non-deliverable forwards ahead of the spot markets opening, a foreign exchange trader at a private bank said. \“Expect 83.35 to be the next resistance (for USD/INR).”

Brent crude oil futures jumped by 0.8% to $97.32 in Asia trading, rising about 12% in September alone. The 10-year U.S. Treasury yield climbed to a fresh 16-year high overnight but was slightly lower in Asia at 4.61%.

“(A move to) 5% is looking more probable by the day,” ING Bank stated in a note, referring to the possibility of the U.S. 10-year Treasury yield continuing its rise.

The dollar index also climbed to a fresh near-10-month high of 106.84 overnight and was hovering close to those levels. Asian currencies were mostly weaker, with the Malaysian ringgit leading losses.

“Intraday low cant be ruled out even if the RBI intervenes,” said Dilip Parmar, a foreign exchange research analyst at HDFC Securities.

Equity-related outflows also bolstered pressure on the rupee as foreign investors are close to breaking a six-month buying streak, having sold $1.51 billion worth of equities in September so far.

Investors will also keep an eye on whether FTSE Russell includes India in its emerging markets government bond index. The decision is expected on Sept. 28.

KEY INDICATORS:

** One-month non-deliverable rupee forward at 83.43; onshore one-month forward premium at 11.50 paise

** USD/INR NSE October futures settled at 83.33 on Wednesday

** USD/INR forward premium as of Sep. 27 for end current month is 10.50 paise

** Dollar index down at 106.61

** Brent crude futures up 0.8% at $97.3 per barrel

** Ten-year U.S. note yield at 4.61%, India 10-yr bond yield at 7.23%

** As per NSDL data, foreign investors bought a net $16.6mln worth of Indian shares on Sep. 26

** NSDL data shows foreign investors bought a net $53.9mln worth of Indian bonds on Sep. 26