The Indian rupee is set to fall against the US dollar at the open on Monday, surpassing the 86 level, after the US jobs report increased the likelihood that the Federal Reserve will not cut interest rates anytime soon .
The one-month non-deliverable futures contract indicates that the rupee will open at an all-time low of 86.10-86.12 against the US dollar, up from 85.9650 in the previous session.
U.S. employers added 256,000 jobs last month, compared to 160,000 expected by economists polled by Reuters, while the unemployment rate fell unexpectedly to 4.1%.
For speculators “who are already engaged” in bearish bets on the rupee, the US employment figures provide “another reason to hold on to them”, said a bank forex trader.
“Having said that, I think we are now close to levels where a number of negatives (for the rupee) are in the price. Plus, we are long overdue for a decent correction.”
For the Federal Reserve, the report “should significantly reduce concerns about downside risks in the labor market, returning attention to inflation in determining next steps,” Morgan Stanley said in a note .
The report should reduce the likelihood of a Fed interest rate cut in the near term, the investment bank said.
Interest rate futures indicate that market participants expect the Fed to cut rates just once this year.
The Fed cut rates three times between September and December of last year.
THE DOLLAR AND US YIELDS CONTINUE THEIR GROWTH
The Dollar Index reached its highest level in more than two years on Friday, at nearly 110. The yield on US 10-year bonds reached its highest level in 14 months.
The dollar, in addition to US data, is boosted by tariffs that President-elect Donald Trump is likely to impose on other countries.
KEY INDICATORS:
** One-month rupee non-deliverable at 86.34; one month onshore forward premium at 23.50 paise.
** Dollar Index up to 109.68
** Brent up 1.5% to $81 per barrel
** Ten-year US bond yield at 4.76%.
** According to NSDL data, foreign investors sold $818.5 million worth of Indian stocks on January 9.
** According to NSDL data, foreign investors bought $106.8 million worth of Indian bonds on January 9.
Related News :