Rupee Poised For Another Record Low On Fed Rate, Oil Worries

The Indian rupee is tipped to extend its recent slide versus the dollar on Monday after the U.S. jobs report cemented bets of more large Federal Reserve rate hikes.

The rupee is expected at around a lifetime low of 82.70 per U.S. dollar, down from 82.32 in the previous session.

The local unit has repeatedly posted record lows in recent sessions on concerns over oil prices, rising Treasury yields, corporate outflows and offshore demand for the U.S. currency.

The Reserve Bank of India's interventions has not been able to arrest the slide in the rupee, unlike on prior occasions.

"The double whammy of higher U.S. rates and higher crude prices is back to haunt the rupee," said IFA Global Research Academy.

"While the RBI was able to defend the rupee successfully through the last round of simultaneous stress on current and capital account by spending its reserves, this time around things are likely to be different."

The RBI has fewer foreign exchange reserves at its disposal presently to protect the rupee. In the week through Sept. 30, India's forex reserves declined to $532.66 billion, the lowest since July 2020. Reserves were at $537.5 billion the week prior.

Treasury yields and the dollar index rose on Friday and U.S. equities plunged following the U.S. jobs data that was considered robust enough to keep the Fed on its path to deliver one more 75 basis points rate hike next month.

The 2-year U.S. yield reached 4.35% in Asia trading, within a whisker of its recent highs. Asian equities were down up to 2.5% and currencies were broadly lower. Futures on the S&P 500 Index dipped after the gauge lost 3% on Friday.

Oil prices eased on Monday, after having extended their rally with a near 4% jump on Friday to five-week highs. An OPEC+ decision to make its largest supply cut since 2020, despite concern about a possible recession and rising interest rates, have boosted crude prices.