CURRENCY OVERVIEW

The Indian rupee opens weaker and is set to encounter headwinds on Thursday from a renewed rise in oil prices and a broadly firmer dollar on account of growing US rate hike expectations, while central bank intervention is expected ‌to limit losses. Over recent trading sessions, frequent interventions by the RBI have helped limit the local currency's fall near the 96 handle however, currencies with limited exposure to the technology cycle and greater vulnerability to higher energy prices could come under renewed pressure. Foreign investors have ‌net ?sold $3.5 billion of Indian stocks and bonds so far this month.

On the Dollar front: A stronger-than-expected US purchasing managers' report overnight fanned new price concerns and a poorly received auction of five-year Treasury notes triggered a fresh jump in yields. The 10-year US Treasury yield was ?up over 15 basis points from its closing level on Tuesday, while five-year yields rose above 5% for the first time since 2007. The dollar clung to a two-month high on Thursday after a strong manufacturing reading reignited inflation fears and rate-hike bets, while a weak Treasury auction sent yields higher across the curve, providing fresh impetus to the US currency. The broad dollar strength ‌pushed the euro to $1.1378, a two-month low, while sterling languished near a three-month nadir at $1.3231. The dollar index , which measures the US currency against a basket of peers, held near a two-month high at 101.1. Signs the US economy may be overheating are now firmly in focus, and policymakers may need to tighten further if inflation continues to surprise on the ‌upside. Traders now see a nearly 70% chance of another increase when the US central bank next meets in October, according to CME Group's FedWatch Tool, up from ?the 50% probability a week ago. At 157.9, the Japanese yen hovered near its three-week low, with traders on alert for possible intervention after markets judged the Bank of Japan's rate hike to a 31-year high last week as insufficiently hawkish. Brent crude fell 1% to $102.05 a barrel, while U.S. West Texas Intermediate slipped 0.74% ?to $91.48 a barrel. Spot gold gained 0.35% to $4,301.89 an ounce. Gold prices were ‌muted on Thursday, pressured by expectations of further Federal Reserve policy tightening, though a dip in oil prices offered some support. Spot gold was down 0.1% at $4,281.98 per ounce, as of 0155 GMT. US gold futures for December delivery were little changed at $4,317.50. While gold is widely regarded as an inflation hedge, rising interest rates tend to diminish its ?appeal relative to interest-bearing investments. Data on Wednesday showed that US business activity raced to a more than five-year high in September, though strong demand strained supply chains and pushed prices higher.Among other metals, spot silver fell 0.6% to $64.07 per ounce, platinum rose 0.2% at $1,754.05 and palladium lost 0.1% to $1,260.70.