Indian Rupee Rebounds After Three-Day Decline Against US Dollar

The Indian rupee reversed its three-day losing streak against the US dollar on Thursday, with USD/INR trading near 95.60374, after dipping to around 95.62 at the time of writing. The US Treasury's announcement of plans to double the size of its bond buyback operations drove long-term Treasury yields sharply lower, weakening the dollar and serving as the primary external driver behind the rupee's rebound.

**Treasury Yield Decline Pressures Dollar**

The Treasury's expanded buyback plan directly lowered long-term Treasury yields, diminishing the yield appeal of dollar assets. The dollar index came under pressure and pulled back, giving emerging market currencies broader breathing room. For the Indian rupee, external pressures eased temporarily, allowing it to recover from its prior consecutive declines.

**Oil Price Movements Remain a Key Variable**

Market reports indicate that recent fluctuations in crude oil prices have significantly influenced the rupee's direction. Earlier, Brent crude falling below $71 per barrel briefly boosted rupee sentiment; however, a subsequent resurgence in geopolitical risks pushed oil prices higher, stalling the rupee's gains. The negative correlation between oil prices and the rupee has been notably pronounced in this cycle, and if oil prices climb again, they could re-impose pressure on the rupee.

**Short-Term Focus on Fed Policy Signals**

Investors are awaiting the Federal Reserve's policy statement to gauge the dollar's next move. If the Fed signals a hawkish stance, the dollar could regain strength, testing the sustainability of the rupee's rebound; conversely, a dovish tone could allow the rupee to extend its recovery. Until then, USD/INR may consolidate around 95.60.