The Indian rupee snapped a four-day losing streak on Tuesday as the dollar eased and oil prices tumbled, but a report stating local bonds may not be considered for listing on a major global index this year capped gains.

The partially convertible rupee ended up just 0.05 per cent at 81.58 per dollar, having touched a session high of 81.31. The currency had hit a record low of 81.6525 on Monday after declining for four straight days.

The rupee eased to a near record low and Indian bond yields rose after Reuters exclusively reported local government bonds will likely only be included in the JPMorgan emerging market global index early next year as New Delhi still needs to address various operational issues.

There had been a lot of optimism around India’s likely inclusion as it would have brought inflows of around $30 billion and a decision was expected as early as this month.

“I think there’s some hesitancy on India’s side about bond index inclusion because it could bring in volatile flows,” said Anitha Rangan, an economist with Equirus Group.

The rupee’s sudden decline was worsened by the Indian central bank probably not supporting the currency as much as in the past few weeks, she added.

Broadly, risk sentiment seemed to be improving as Asian currencies made small gains, but worries about the dollar resuming its upsurge due to tighter monetary policy conditions lingered.

The dollar index eased 0.3 per cent to 113.76 by 0956 GMT, backing off from two-decade highs. It had gained almost 4 per cent starting last week on the back of hawkish Federal Reserve comments.

Meanwhile, crude prices hit a 9-month low overnight, having shed 12 per cent this month alone, which bodes well for the rupee as India is a major oil importer.

Local bond settlement rules, tax complexities and the way in which investors will repatriate dollars are among the operational issues that still need to be resolved, said a fund manager at a large global fund. Index investors tend to favour international settlement platforms such as Euroclear but India has said it wants to settle bonds onshore, like China.

“India is working to get its bonds included but operationally it is not ready,” a source told Reuters.

India has sought to be included in global bond indexes since 2013, but that ambition has been held up by a number of factors over the years, and JPMorgan only began considering India’s inclusion in its global bond index in 2021.

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