Rupee, bonds retire as oil prices rise

Oil prices rose more than $3 as EU nations considered joining the US on a Russian oil embargo

Oil prices rose more than $3 as EU nations considered joining the US on a Russian oil embargo

Indian bond yields rose on Monday, while the rupee weakened as a surge in crude oil prices fueled fears of imported inflation and higher trade and current account deficits.

Oil prices rose more than $3 on the day, pushing global benchmark Brent above $111 a barrel as European Union countries considered joining the United States in a Russian oil embargo amid a weekend crackdown on Saudi oil assets for jitters worried.

India imports more than 80% of its oil needs and the rise in crude oil prices may widen the country’s trade deficit and weaken the rupee, while also increasing imported inflation.

The benchmark 10-year yield traded at 6.79%, up 1 basis point, while the partially convertible rupee was weaker at 76.13/14 per dollar compared to its close of 75.7950 on Friday.

“Domestic, we don’t have any triggers at the moment,” said a senior trader at a foreign bank. “The credit calendar will be the next major event ahead of next month’s monetary policy review.”

Traders said the 10-year yield is likely to be in a range of 6.75% to 6.85% by the time the credit calendar is released. The government is set to borrow a record £14.31 trillion in the fiscal year starting April 1.

Broader emerging Asian currencies also weakened against the US dollar, and most equity markets in the region fell, dragged down by worries about the economic fallout from a deepening conflict between Russia and Ukraine.

The greenback’s strength on Friday followed comments from two of the Federal Reserve’s most hawkish policymakers calling for more aggressive steps to fight inflation. Two other policymakers also said they were open to it – one of them envisioned a no-rate-hike year in 2022 just six months ago.

Overnight focus will be on Fed Chair Jerome Powell’s speech for near-term cues.

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