Indian rupee drops to two-month low as global bond rout deepens, oil jumps

Mumbai witnessed the Indian rupee hitting its weakest level in two months on Thursday, as global bond yields soared to their highest levels in over a decade and oil prices surged past the $100-per-barrel mark. The Indian rupee ended down by 0.5% to 96.3150 per dollar, marking its steepest single-day decline in more than two months.

This fall occurred after the rupee breached the psychological barrier of 96, despite state-run banks limiting its decline through dollar sales. The surge in borrowing costs from the US to European nations and Japan further exacerbated the pressure on the currency, threatening global assets such as stocks and credit markets. The 10-year US Treasury yield, which serves as a benchmark for borrowing costs worldwide, leapt to 5.34%, its highest point since 2002.

Meanwhile, Brent crude oil prices reclaimed the $100-per-barrel threshold, a development driven by China's suspension of oil product exports. This situation has raised concerns about potential risks to inflation, the rupee's value, and capital flows in the short term. The Indian government acknowledged these pressures in a report on Thursday, emphasizing the need for caution in hedging strategies for both exporters and importers in the foreign exchange market.

IFA Global, an FX advisory firm, advised exporters to hedge their receivables cautiously, limiting exposure to in-hand orders, while importers were recommended to hedge on any dips in the dollar-rupee exchange rate. Meanwhile, other Asian currencies experienced a decline of 0.1% to 0.4%, while the dollar index rose by 0.5% to nearly 102.

Investors are now eagerly awaiting a key US labor market report due on Friday, and Indian financial markets will remain closed for a local holiday.