FX.co ★ Rupee Slips on Oil, Firmer Dollar

The Indian rupee weakened to around 95.8 per dollar, extending its decline for another session as renewed gains in oil prices and a broadly stronger US dollar, driven by rising expectations of further Federal Reserve rate hikes, pressured the currency. A stronger-than-expected US purchasing managers’ report heightened inflation concerns, while a poorly received five-year US Treasury auction pushed yields higher: the 10-year yield rose more than 15 basis points from Tuesday’s close, and the five-year yield climbed above 5% for the first time since 2007. Brent crude climbed back above the $100-a-barrel mark, even as Iran signaled a willingness to engage in diplomacy to resolve tensions with the United States. Foreign investors have been net sellers of about $3.5 billion in Indian equities and bonds so far this month, adding to downward pressure on the rupee. At the same time, frequent intervention by the Reserve Bank of India has helped contain losses near the 96 level, with the central bank reportedly conducting at least $10 billion in sell-buy FX swaps in recent weeks to absorb excess rupee liquidity.