Indian bonds, the rupee collapse as emerging markets are under pressure

MUMBAI (Reuters) – Indian bonds and the rupee collapsed on Monday, as emerging-market assets were under renewed pressure from the rising dollar, higher crude oil prices and heightened trade tensions .

The Reserve Bank of India (RBI) and its counterparts in other emerging economies have been forced to defend their currencies recently, as a result of a convergence of dollar-friendly protests.

However, the RBI did not see active intervention in the foreign exchange markets as it did Friday, traders said.

The yield on 10-year benchmark bonds reached 8.12%, its highest level since November 28, 2014, as rising global crude oil prices exacerbated inflation fears.

The rupee also touched on Monday the lowest standard of living of 72.4450 weighed on the dollar, supported by a strong dollar support thanks to strong figures of US jobs Friday, which reinforced the expectations of further rate hikes in the US dollar. Federal Reserve.

The 10-year bond ended at 8.03% Friday and the rupee at 71.73 percent.

"The RBI is not trying to defend any level today," said a senior forex analyst at a state-owned bank.

"The next strong technical resistance is between 72 / 50-72.75 (per dollar)".

Exacerbated fears that Washington will impose new tariffs on China have also pushed investors to seek the security of the dollar and withdraw from emerging market currencies.

High oil prices have been an obstacle for the rupee and the bonds. India imports more than two-thirds of its crude oil requirements, and any increase in world prices not only drives demand for dollars from importers, but also raises inflationary concerns in the country.

The RBI raised its key rate in two successive meetings of 50 basis points in total, its goal being to contain inflation at 4% in the medium term. Overall consumer inflation rose 4.17% in July from the previous year and is expected to accelerate as a result of higher crude prices and the weakening of the rupee.

Oil prices rose as US drilling for new production stagnated and the market tightened once Washington's sanctions against Iranian crude exports began in November.