Rupee weakens for third straight day as higher US yields, oil prices weigh

The Indian rupee weakened for a third straight session on Wednesday as elevated U.S. Treasury yields and rising global crude oil prices weighed on the local unit.

The rupee closed at 83.1325 against the U.S. dollar, down 0.11% from its close of 83.04 on Tuesday. During the session, the currency dropped to 83.18, its lowest level in more than 10 months.

The rupee could take a breather tomorrow, a foreign exchange trader at a foreign bank said.

Expectations that the Reserve Bank of India (RBI) may step in to defend the rupee around the 83.20-25 levels and a slight reversal in crude prices could support the local unit, the trader added. The rupee's Asian peers were also weighed down by high U.S. Treasury yields. The 10-year U.S. Treasury yield climbed to 4.25%, while the 2-year yield rose to 4.94%.

The Malaysian ringgit and Indonesian rupiah led losses among Asian currencies, while the onshore Chinese yuan dropped to a 10-month low before paring losses after intervention from state-run banks.

Brent crude futures retreated to $89.47 in Asian hours, having risen above $90 on Tuesday. The dollar index was at 104.7, not too far off from a six-month high of 104.9 hit overnight.

For the next day or two, betting on the rupee to fall further "doesn't present a favourable risk-reward situation," said Dilip Parmar, a foreign exchange research analyst at HDFC Securities.

Parmar expects the rupee to continue moving towards a new record low but only after cooling off for a couple of days. The rupee's record low is 83.29, hit in October 2022.

The economic data calendar is relatively light this week but U.S. PMI numbers due later today and jobless claims data due on Thursday could provide further cues for movement in U.S. Treasury yields.