Indian rupee at three-week low

The Indian rupee fell to its lowest level in three weeks, and bond yields slipped on Friday as worries over a new coronavirus variant alarmed markets across the globe.

Shares and currencies in Asia’s emerging markets declined sharply as investors fled riskier assets following the detection of the significant new mutation, which in turn strengthened safe-haven assets such as the dollar.

The partially convertible rupee was trading 74.71/72 by a dollar at 0736 GMT related to its close of 74.51. It reached a low of 74.5850 earlier, its weakest after Nov. 2.

The benchmark 10-year bond yield was trading at 6.32%, falling 5 basis points from its end on Thursday.

Monetary policy decision awaited

The Reserve Bank of India should announce its monetary policy committee’s determination after a three-day meeting on Dec. 8. A large market has been hoping to increase the reserve repo rate to normalize the policy rate corridor to pre-epidemic levels.

The central bank has previously started convoying variable rate reverse repo auctions of somewhat longer tenors to temporarily occupy the massive liquidity excess in the banking system but has shied away from publishing any more permanent measures so far.

Traders anticipate the 10-year bond yield to trade in a 6.25% to 6.40% range until the policy determination. At the same time, the rupee should track domestic shares and dollar moves for direction. It might be holding between 74.25 to 75 per dollar range over the next two weeks.

Moves in global crude oil prices will also be strictly monitored. They have a significant influence on India’s import bill. The country shipping in more than three-fourths of its oil demands.

Oil prices slipped more than 2% on Friday on worries that a global supply excess could swell in the first quarter following U.S.-led coordinated publicity of crude reserves among major consumers and as the new coronavirus variant spooked investors.