The Indian rupee is set to decline on Friday after robust private hiring data in the United States heightened fears of further Federal Reserve policy tightening. Non-deliverable forwards suggest the rupee will open at roughly 82.66-82.70 per US dollar, up from 82.51 in the previous session.
“Most big moves happen when people least expect it. And after what happened at the beginning of the week, I would say people are all the more unprepared,” a currency trader at a bank said. “What worries me is that even right now, more people than not think this up move (on USD/INR) is temporary and will reverse.”
The rupee rose to 81.75 on Monday as a result of equities inflows. US rates jumped overnight, as shares fell after stronger-than-expected job and activity statistics. The ADP National Employment report indicated that private payrolls in the United States increased by 497,000 jobs last month, well exceeding estimates, offering more evidence of a strong labor market despite Fed rate hikes. Meanwhile, the Institute for Supply Management (ISM) reported that the U.S. services sector expanded at a faster rate in June.
The 10-year yield in the United States surpassed 4% for the first time since March, while the two-year yield reached its highest level in 16 years. A 25-basis-point Fed rate hike at this month’s meeting is now fully priced in, and the likelihood of another hike in November have risen.
The focus now shifts to the critical nonfarm payrolls (NFP) statistics from the United States, which will be released later in the day. “Market participants will be looking forward to tonight’s NFP to see if job gains are as strong as ADP figures suggest,” DBS Research said in a daily note. “Hourly earnings will also be closely scrutinized to determine how tight the labor market truly is.”
Source:FE