INDIA RUPEE-Rupee nearly flat wedged between yuan weakness, dip in US bond yields

The Indian rupee maintained its position against the US dollar with minimal change on July 3, 2024, as the Asian currency market remained influenced by the weakness of the Japanese yen and the Chinese yuan, along with the dip in US bond yields.

The Japanese yen had weakened against the US dollar due to the Bank of Japan's decision to maintain its ultra-loose monetary policy, which kept interest rates lower than those of other major economies. This weighed down on the Japanese currency and put pressure on other regional currencies, including the Indian rupee.

The Chinese yuan also experienced depreciation against the US dollar due to ongoing trade tensions between China and the United States. The uncertainty surrounding the trade negotiations and the potential for further tariffs imposed by both sides has caused investors to reduce their holdings of the Chinese currency, leading to its depreciation.

The Indian rupee was trading at 83.50 against the US dollar at 10:20 a.m. IST (Indian Standard Time), barely changed from its previous close of 83.5050. This stability can be attributed to the fact that the Reserve Bank of India (RBI) has been intervening in the foreign exchange market to prevent excessive volatility in the rupee's value.

The dip in US bond yields also had a limited impact on the Indian rupee. US bond yields had fallen due to expectations of lower interest rates from the Federal Reserve in response to global economic slowdown concerns and trade tensions. Lower interest rates make it less attractive for investors to hold dollars, which can lead to a weaker dollar and potential gains for other currencies. However, the impact of this trend was offset by the pressure from the Japanese yen and Chinese yuan weakness.

In summary, the Indian rupee remained relatively stable against the US dollar on July 3, 2024, despite the dip in US bond yields and the ongoing pressure from the Japanese yen and Chinese yuan weakness. The Reserve Bank of India's intervention in the foreign exchange market helped to limit the rupee's volatility during this period.