Rupee set for record low on rise in U.S. yields, risk aversion

By Nimesh Vora and Anushka Trivedi

MUMBAI, Sept 28 (Reuters) - The Indian rupee is tipped to open at a record low against the dollar on Wednesday, after U.S. Treasury yields rose and equities extended losses.

The rupee INR=IN is expected at around 81.80-81.85 per U.S. dollar at open, down from 81.58 in the previous session. The rupee reached a record low of 81.6525 on Monday.

The local unit traded in a 81.30 to 81.64 range on Tuesday amid a Reuters report that the India's bond inclusion into the JPMorgan emerging market index could be delayed to next year.

It looks like the rupee's "sort of respite yesterday" will prove temporary and "we are back to talking about the 82 level", a trader at a Mumbai-based bank said.

The 10-year U.S. Treasury yield topped 4% on Wednesday for the first time since 2010. The 10-year yield rose to the key psychological level a week after the two-year yield did it. The dollar index =USD climbed to 114.68, new multi-year highs.

"Without the dollar index and the Treasury yields stabilising, it is highly difficult to place a floor for the rupee," the trader said. "Again, it will be about RBI watching today."

The Reserve Bank of India has been selling dollars in the face of rupee's fall to record lows and it is likely that the central bank will continue to do so, according to traders.

Hawkish commentary from U.S. Federal Reserve officials alongside worries over the inflation outlook is fuelling the rout in U.S. bonds and boosting the dollar.

Chicago Fed President Charles Evans and St. Louis Fed President James Bullard sounded the hawkish alarm on Tuesday, lifting rates higher.

Asian currencies plunged, led by the Chinese yuan and the South Korean won. The offshore yuan CNH= was down 0.8% to 7.2332 to the dollar.

Asian shares were down up to 2.5% and futures indicated more losses for U.S. equities. KEY INDICATORS: ** One-month non-deliverable rupee INRNDFOR= forward at 82.16; onshore one-month forward premium at 26 paise ** USD/INR NSE October futures closed on Tuesday at 81.8450 ** USD/INR forward premium INR1FC= for October at 27 paise ** Dollar index =USD up at 114.6 ** Brent crude futures LCOc1 down 1.8% at $84.7 per barrel ** Ten-year U.S. note yield at 3.99% ** SGX Nifty SINc1 nearest-month futures down 1.1% at 16,853 ** As per NSDL data, foreign investors sold a net $570.3 mln worth of Indian shares on Sept. 26 ** NSDL data shows foreign investors bought a net $53. 4mln worth of Indian bonds on Sept. 26
Reporting by Nimesh Vora; Editing by Rashmi Aich

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