By Nimesh Vora
MUMBAI (Reuters) – Weakness in Asian currencies persisted on Friday, sparked by a post-Fed rise in the dollar and U.S. yields, leaving the Indian rupee exposed to further losses and a potential record low.
The rupee dropped to an intraday low of 88.32 to the U.S. dollar, close to the all-time low of 88.4550 hit last week. The currency was last quoting at 88.30.
The rupee is caught “in a whippy down move” and surprisingly is back under pressure after it looked like it was “poised for good days,” a currency trader at a private sector bank said.
The rupee climbed past 88 on Wednesday, prompting a section of interbank traders to consider that the worst might be over and the currency could enjoy a brief respite.
That optimism proved short-lived, however, with weakness in Asian peers after the Fed decision rekindling the downtrend. The Korean won and the Indonesian rupiah were down 0.5% each.
While the Fed cut rates and projected more reductions ahead, the reaction in the U.S. dollar and Treasury yields suggested that when combined with Chair Jerome Powell’s press conference, the outcome was on balance more hawkish than initially expected, analysts said.
The dollar index, which hit a low of 96.22 on Wednesday’s Fed decision day, has recovered to 97.46. The 2-year Treasury yield is trading more than 10 basis points above Wednesday’s intraday low.
The move higher in the dollar and yields was supported by Thursday’s U.S. jobless claims data, which showed a drop in new applications for unemployment benefits last week, reversing the prior week’s increase.
(Reporting by Nimesh Vora)
