Rupee declines as uptick in US bond yields squeezes most Asian peers

By Jaspreet Kalra

MUMBAI (Reuters) - The Indian rupee was weaker on Monday as a jump in U.S. bond yields put pressure on most Asian currencies.

The rupee was at 83.46 against the U.S. dollar as of 10:15 a.m. IST, compared to its close at 83.3825 in the previous session.

The offshore Chinese yuan slipped alongside most Asian currencies, while the dollar index was down 0.1% at 105.6.

Weakness in the yuan and the Japanese yen has also added to the pressure on Asian currencies over the last two weeks, with traders expecting any further decline to trickle down to the rupee.

The Chinese central bank's "fixing rate (for USD/CNY) has continued to drift higher ... signalling to markets that the authorities are willing to tolerate a weaker yuan," Lloyd Chan, a senior currency analyst at MUFG Bank, said in a note.

The onshore spot yuan can only trade in a 2% range around the mid-point fixed by the People's Bank of China.

While data released on Friday signalled that U.S. inflation is cooling, the chances of a second term for former U.S. President Donald Trump pushed up U.S. bond yields, with the 10-year yield last quoted 5 basis points (bps) higher at 4.39% on Friday.

Meanwhile, India's inclusion in the JPMorgan emerging market debt index helped the rupee in the latter half of last week, but inflows of about $198 million on Friday, the day of the inclusion, were considerably lower than what bankers had expected.

With inflows undershooting estimates and key U.S. data, including the non-farm payrolls report, expected this week, traders anticipate that the rupee will remain slightly on the backfoot.

"We don't see much room on the lower side (on USD/INR) ... Expect 83.30 support to hold until we see further downside in the dollar index," a foreign exchange trader at a state-run bank said.

(Reporting by Jaspreet Kalra; Editing by Sonia Cheema)