Rupee seen at record low as dollar, U.S. yields surge; RBI eyed


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MUMBAI — The Indian rupee is poised to hit a new lifetime low against the U.S. currency on Monday, as worsening risk sentiment and a tumbling pound lifted the dollar index to its highest since 2002.

The rupee is tipped to open at around 81.30 per U.S. dollar, down from 80.9900 in the previous session.

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The local unit had reached a record low of 81.2250 on Friday, prompting the Reserve Bank of India (RBI) to sell dollars, according to traders. The RBI’s intervention had aided the rupee to turn briefly higher on Friday.

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“It will be another choppy and volatile session. All eyes will be on state-run banks at open,” a trader at a Mumbai-based bank said, alluding to intervention from the RBI through these banks.

“The intervention by RBI at 81.20 was quite forceful and markets will want to know if that level will be protected again,” the trader said, adding, the RBI may not be too inclined to intervene given the “carnage” across Asian currencies.

The dollar index in Asia trading climbed above 114.50, the highest since May 2002, thanks to demand for safe-haven assets and a collapsing British pound.

The pound tumbled to a record low on Monday on fears the new government’s economic plan will stretch its finances to the limit. The rout prompted speculation of an emergency response from the Bank of England.

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Asian equity gauges fell by as much as 2.4% and futures pointed to more losses for the S&P 500 Index. The offshore Chinese yuan declined below 7.16 to the dollar and the Korean won dropped more than a percent.

Treasury yields continued to march higher, not benefiting from the risk-off sentiment. The 2-year Treasury yield reached a fresh multi-year high of 4.27% on bets that the Federal Reserve will continue to hike rates aggressively despite the mounting growth risks. KEY INDICATORS: ** One-month non-deliverable rupee forward at 81.54; onshore one-month forward premium at 21 paise ** USD/INR NSE September futures closed on Friday at 81.1150 ** USD/INR forward premium for end current month is 1.0 paise ** Dollar index at 113.62 ** Brent crude futures up 0.3% at $86.4 per barrel ** Ten-year U.S. note yield at 3.72% ** SGX Nifty nearest-month futures down 0.9% at 17,175 ** As per NSDL data, foreign investors sold a net $275.9mln worth of Indian shares on Sep. 22 ** NSDL data shows foreign investors sold a net $57.2mln worth of Indian bonds on Sep. 22 (Reporting by Nimesh Vora; Editing by Neha Arora)


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