The Indian rupee declined by 12 paise in early trading, reaching 83.56, down from its previous close at 83.4375.
Anticipated to weaken at the start of Tuesday's session, the rupee faced pressure due to a surge in US Treasury yields, fueled by growing expectations of Donald Trump's victory in the US presidential election. Asian currencies experienced a downturn, ranging from 0.1% to 0.5% losses, with the offshore Chinese yuan slipping below 7.3050 against the US dollar.
A currency trader from a bank commented that the rupee would 'struggle' today, mirroring the Asian trend. The 10-year US yield surged to almost 4.50% during Monday's New York trading session, marking a one-month high. The rising chances of Trump's success in the November election are compelling investors to seek higher yields on US Treasuries.
After US President Joe Biden's debate performance last week, which received widespread criticism, the likelihood of a Trump win has risen to 60%, according to the political betting website PredictIt. Morgan Stanley noted in a report that 'market participants are factoring in fiscal concerns and higher inflation due to potential election results.'
Elections are now the focal point, with heightened attention on their outcomes and ongoing political uncertainty influencing market movements, according to Morgan Stanley, referencing the US and French elections. Despite weak US manufacturing data released on Monday, which indicated a third consecutive month of contraction in June according to the Institute for Supply Management, US yields have risen.
