By Nimesh Vora
MUMBAI (Reuters) – The Indian rupee is likely to open largely unchanged on Monday, despite a drop in U.S. Treasury yields and the dollar after the monthly U.S. jobs report made it more likely that the Federal Reserve will cut interest rates later in the year.
Non-deliverable forwards indicate the rupee will open flat from 83.4150 in the previous session.
Asia “has not done too much” and “anyway, you need a lot” for the rupee to move, an fx trader at a bank said.
“Maybe at least the constant buying pressure (on USD/INR) over the last number of sessions will reduce and 83.50-83.55 will go out of consideration,” he said.
The 10-year U.S. Treasury yield dropped to the lowest in three weeks on Friday after the world’s largest economy added fewer jobs than expected. The unemployment rate ticked higher, while wages grew less than forecast.
Investors are now pricing in nearly two rate cuts by the Fed this year, reinforcing Fed Chair Jerome Powell’s view that a rate hike was unlikely.
While one softer report doesn’t make a trend, the data does validate the Fed’s stated guidance that the current policy is restrictive, ANZ Bank said in a note.
The U.S. services sector unexpectedly contracted last month, a survey showed, providing more reason for investors to buy Treasuries and avoid the dollar.
The dollar index dropped to the lowest in just under a month on Friday. U.S. equities rallied. Despite this, Asia currencies were mostly lower to begin the week, with the Japanese yen and the offshore Chinese yuan both down.
It is a light week in terms of U.S. data releases and the focus will be on a number of Fed speakers lined up to speak.
KEY INDICATORS: ** One-month non-deliverable rupee forward at 83.50; onshore one-month forward premium at 7.5 paise ** Dollar index down at 105.08 ** Brent crude futures up 0.4% at $83.3 per barrel ** Ten-year U.S. note yield at 4.5%
** As per NSDL data, foreign investors sold a net $83.3mln worth of Indian shares on May. 2
** NSDL data shows foreign investors sold a net $174.8mln worth of Indian bonds on May. 2
(Reporting by Nimesh Vora; Editing by Janane Venkatraman)
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