With last week’s positive momentum and data that increased the odds of a Fed rate hike, the Indian rupee may be steady or slightly higher against the U.S. dollar on Monday.
Non-deliverable futures show the rupee opening at 81.84-81.88 to the dollar, down from 81.8850 in the previous session.
Traders said foreign equities inflows and speculative positions had boosted the rupee for three weeks—the first weekly closing above 82 in two months.
“U.S. jobs has helped stem the dollar’s decline, but then there would be few buyers (of USD/INR) at least at open, based on rupee’s near-term trajectory,” a private sector bank trader said.
Data showing healthy hiring by U.S. firms lowered the unemployment rate to 3.5%, increasing the odds that the Fed would raise rates by 25 basis points at its May meeting to almost 70%. Annual pay growth fell but remained too high for the Fed’s inflation aim.
“The labor market remains tight and paired with our projection for a 0.39% month-on-month increase in core CPI (consumer price index), we continue to expect the Fed to deliver 25bp at the May meeting,” Morgan Stanley wrote.
Wednesday brings U.S. inflation figures. Reuters surveyed economists forecast a 0.3% monthly increase in CPI and 0.4% in core CPI.
The 2-year yield climbed to 3.96%, while the dollar strengthened against its main counterparts. Risk appetite has held up nicely to rising Fed rate rise odds.
U.S. market futures and Asian shares started the week slightly higher.
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