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The Indian rupee declined on Monday and far forward premiums dropped to the lowest level this year, tracking the move up in U.S. yields post the jobs report.

The rupee was quoting at 82.5550 to the U.S. dollar by 10:50 IST, down from 82.3050 in the previous session. The 1-year USD/INR implied yield was down 7 basis points to 1.70%, the lowest since December 2022.

It is a "bit surprising" that the rupee is down to near 82.50, a spot trader at a private bank said. On the other hand, another leg lower on premiums is "not at all surprising".

U.S. yields jumped on Friday and moved up further in Asia after job growth accelerated in the United States in May. The data indicated the U.S. labour market remained robust in the face of the rate hike cycle, pushing investors out of U.S. bonds.

The report did not change expectations that the U.S. Federal Reserve is likely to hit a pause next week and opt for a rate hike in July.

The June Fed meeting's "skip narrative" still holds, but we are nervous that a "hot core" consumer inflation print could yet tip the balance, ING Bank said in a note.

The U.S. inflation data is due on June 13 and the Fed's decision is scheduled on June 14.

Meanwhile, the Reserve Bank of India's policy decision is due this Thursday. It is expected the central bank will leave the key interest rate unchanged at 6.50% after having surprised the market with a status quo on rates in its April policy.