The Indian rupee is expected to open lower on Monday, after employment data indicated the US labor market remains strong, reducing the likelihood of a Federal Reserve rate cut later in the year.
Non-deliverable futures indicate that the rupee will decline to around 83.48-83.50 from 83.3725 in the previous session.
Last week, the rupee was roiled by India’s election results, which prompted foreigners to sell local stocks and likely dollar sales by the Reserve Bank of India.
“I think this repeated RBI intervention near 83.50-83.55 and waiting for that will mean the higher opening (on dollar/rupee) will not have much effect. At least initially,” said a bank foreign exchange trader.
The dollar index rose Friday, and 10-year U.S. Treasury yields saw their biggest rise in two months after data showed job growth accelerated more than expected in May.
The likelihood that the Fed will cut rates at the September meeting has fallen. Futures are now forecasting just 35 basis points of rate cuts this year, down from nearly 50 basis points before the data was released.
U.S. wage inflation rose in May as average hourly wages rose 0.4% after rising 0.2% in April, providing further reason to reduce bets on a rate cut of the Fed.
“In terms of what it means for the Fed, this confirms that the Fed is going to push back its rate cut projections from 3 cuts this year to very likely 2 cuts this year…we can’t rule out that they’re just saying one only decline this year,” ING bank said in a note.
Asian currencies fell on the day, with the Korean won, Thai baht and Indonesian rupiah losing between 0.5% and 0.8%. Asian stocks fell, as did U.S. stock futures.
KEY INDICATORS: ** Dollar index up to 105.12 ** Crude oil futures up 0.2% at $79.8 a barrel ** US ten-year bond yield at 4.45 % ** According to NSDL data, foreign investors sold $811.2 million worth of Indian stocks on June 6.
** According to NSDL data, foreign investors bought $112.8 million worth of Indian bonds on June 6.
