MUMBAI: The Indian rupee is expected to decline at open on Monday after a robust US jobs report and comments by Federal Reserve Chair Jerome Powell prompted a plunge in the odds of an interest rate cut in March.
Non-deliverable forwards indicate the rupee will open at around 83 to the US dollar, compared with its close of 82.9175 in the previous session.
Investors are now pricing in only a 15% probability that the Fed will cut rates at its next meeting in March.
The dollar index climbed to its highest since mid-December and the two-year US yield rose to a one-month peak. Data on Friday showed US job growth in January surged well past expectations, while the data for December was revised higher.
Average hourly earnings increased the most since March 2022.
The employment report “extended the November-December acceleration in payrolls into January” and earnings too showed a reacceleration, Morgan Stanley said in a note.
In short, the brokerage added, it was a labour market “that is showing little signs of easing” and reaffirms our view that the Fed will be on hold until June.
Indian rupee closes slightly higher, logs weekly gain
Fed Chair Powell, in an interview on CBS “60 Minutes” aired in Asia hours on Monday, repeated that it was likely too soon to have confidence to cut rates in March, further magnifying the impact of the jobs report on Treasuries.
The 10-year US yield made a high of 4.0950 in Asia trading.
Asian currencies sank, with the Korean won down 1.20% and the Malaysian ringgit slipping 0.8%.
The offshore Chinese yuan weakened to 7.21 to the US dollar. The “big moves” in Asia will make the rupee decline past 83 to the dollar at open, and then we “will just have to see how the inflows pan out”, an fx trader at a bank said.
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