The Indian rupee fell 12 paise in early trade to 83.56, from a previous closing of 83.44.
The rupee was expected to decline at the open on Tuesday, weighed down by a further rise in US Treasury yields amid increasing expectations of Donald Trump winning the US presidency.
Asian currencies were down between 0.1 per cent and 0.5 per cent, with the offshore Chinese yuan dipping below 7.3050 to the U.S. dollar.
In line with Asia, the rupee will “have it difficult” today, a currency trader at a bank said.
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The 10-year US yield climbed to nearly 4.50 per cent in the New York trading session on Monday, its highest level in a month. The increasing likelihood that Trump will prevail in the November election is prompting investors to demand higher yields on US Treasuries.
Following US President Joe Biden’s debate performance last week, which was widely criticized, the probability of a Trump presidential win has climbed to 60%, per political betting website PredictIt.
“Market participants (are) pricing in fiscal concerns and higher inflation given potential election outcomes,” Morgan Stanley said in a note.
Elections are taking centre stage, with increased focus on outcomes and political uncertainty continuing to drive price action, Morgan Stanley said, referring to the US and French elections.
The jump in US yields comes despite weak US manufacturing data on Monday. The Institute for Supply Management’s reading showed US manufacturing contracted for a third straight month in June.