Rupee to weaken after rare positive news for dollar from US jobs report

Mint

8 hours ago

MUMBAI, July 4(Reuters) - The Indian rupee is set to decline at open on Friday after data showed the U.S. labour market remained resilient, fuelling a rally in the dollar and pushing up Treasury yields.
The 1-month non-deliverable forward indicated an open in the 85.46 to 85.50 range, versus 85.31 in the previous session.
"The 85.30 level is a major support (for USD/INR), and the U.S. jobs data just reinforces that it's unlikely to break below that level in a hurry," a currency dealer at a Mumbai-based bank.
"The dollar's broad recovery and the U.S. yield move have locked in that floor for now."
U.S. data on Thursday showed non-farm payrolls rose more than forecast in June, while the unemployment rate unexpectedly dipped, highlighting ongoing labour market strength.
Treasury yields climbed, lifting the dollar against major peers, while markets dialled back expectations of a Federal Reserve rate cut at this month's meeting.
The jobs data is a 'rare piece of good news" for the U.S. dollar, Richard Potts, economist at FX advisory firm Bondford, said.
"The data reduces the likelihood of the US Fed cutting rates at the July (meeting), maintaining the rate advantage U.S. has over other major economies," he said, while noting that just days earlier, Fed Chair Jerome Powell had kept the door open to a July cut, which had weighed on the dollar.
Meanwhile, the Republican-controlled House of Representatives narrowly passed U.S. President Donald Trump's spending and tax cuts bill that is estimated to add $3.4 trillion to the nation's $36.2 trillion debt.
"The question is how much of the bill's passage was already priced in," said Chris Weston, head of research at broker Pepperstone.
Weston said the longer segment of the Treasury curve needs to be tracked for any rise in the term premium before making a call.
** India's market regulator bars U.S. trading company Jane Street from accessing the local securities market
** One-month non-deliverable rupee forward at 85.58; onshore one-month forward premium at 10 paise
** Dollar index up at 97.01
** Brent crude futures down 0.4% at $68.5 per barrel
** Ten-year U.S. note yield at 4.35%
** As per NSDL data, foreign investors sold a net $87.2 million worth of Indian shares on July 2
** NSDL data shows foreign investors sold a net $158.6 million worth of Indian bonds on July 2
(Reporting by Nimesh Vora; Editing by Mrigank Dhaniwala)