Indian Rupee Surges as US Bond Yields Plummet
The Indian Rupee (INR) broke its three-day losing streak against the US Dollar (USD) on Thursday, rebounding to near 95.62. This improvement in the INR's value comes as a result of a sharp decline in long-dated United States bond yields.
According to reports from The Wall Street Journal, the US Treasury Department has announced that it plans to double its bond-buyback operations for longer-dated nominal securities, with the current maximum size being at least $4 billion per operation. This move aims to curb a sharp increase in borrowing costs.
The decline in US bond yields has weakened the US Dollar, making riskier currencies like the INR more appealing to investors. The US Dollar Index (DXY) reached a fresh seven-week low of 98.77 on Wednesday, and 30-year US Treasury Yields dropped almost 2% from Tuesday's closing price to near 5.18%. Meanwhile, 10-year US Treasury Yields held onto Wednesday's losses near 4.64%.
The Federal Open Market Committee (FOMC) minutes of the July meeting showed that many board members supported interest rate hikes if inflation remains higher. However, despite this support, there is still a 67% chance that the Fed will leave policy rates unchanged in September, according to the CME FedWatch tool.