MUMBAI: The Indian rupee is set to come under renewed stress on Monday after the US economy added slightly more number of jobs than was expected, prompting a rise in US Treasury yields and bringing relief to the dollar.
The 1-month non-deliverable forward indicated a open in the 85.74-85.78 range, versus the close of 85.6250 in the previous session.
The Indian currency had found respite on Friday after the Reserve Bank of India delivered a larger-than-expected rate cut while the signalling limited room for more reductions.
The policy surprise lifted domestic equities and lent support to the rupee.
“The opening today is probably just a retracement of Friday’s move,” a currency trader at a Mumbai-based bank said.
“With the US jobs data broadly positive for the dollar, the rupee is simply coming back under pressure.” The trader is betting on a 85.60-86.00 range for the week with bias more-or-less neutral.
US jobs surprise
Employers added 139,000 jobs last month, above estimates for an increase of 130,000.
Average hourly earnings increased 0.4% in May against a rise of 0.3%.
Indian rupee rally likely to extend on positive Asian cues, inflow hopes
The unemployment rate was unchanged at 4.2%.
Federal Reserve rate cut expectations were scaled back post the data, Morgan Stanley said in its daily commentary.
The market-implied rate for the December Fed meeting was re-priced 9 basis points higher, implying just 42 bps of rate cuts through 2025, it said, adding that the probability of a rate cut in July fell to 12% from 25%.
The 10-year US Treasury yield climbed nearly twelve bps on Friday and the dollar index rose 0.5%.
The key US jobs report followed a string of mostly weak data points that had raised concerns about the economic outlook.
With that risk now tempered to an extent, attention turns to the pivotal US-China trade talks scheduled to take place in London later in the day.
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