Rupee to extend decline as US data points to more Fed rate hikes
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The Indian rupee is poised to fall on Friday after strong U.S. private hiring data exacerbated worries of more Federal Reserve policy tightening.
Non-deliverable forwards indicate rupee will open at around 82.66-82.70 to the U.S. dollar compared with 82.51 in the previous session.
"Most big moves happen when people least expect it. And after what happened at the beginning of the week, I would say people are all the more unprepared," a currency trader at a bank said.
"What worries me is that even right now, more people than not think this up move (on USD/INR) is temporary and will reverse."
On Monday, the rupee had managed to reach 81.75 on the back of equity inflows.
U.S. yields rose overnight, equities dropped following stronger-than-expected employment and activity data.
U.S. private payrolls jumped by 497,000 jobs last month, the ADP National Employment report showed, well above forecasts, providing more evidence of a resilient labour market despite the Fed rate hikes.
Meanwhile, a report from the Institute for Supply Management (ISM) showed the U.S. services sector expanded at an accelerated pace in June.
The U.S. 10-year yield climbed above 4% for the first time since March and the two-year reached its highest in 16 years. A Fed rate hike of 25 basis points at this month's meeting is now fully priced in and odds of another follow-up hike in November rose.
Focus now turns to the crucial U.S. non-farm payrolls (NFP) data out later in the day.
"Market participants will be awaiting tonight's NFP to see if the job gains are as strong as the ADP figures suggest," DBS Research said in a daily note.
"Close attention will also be paid to hourly earnings to get a gauge of how tight the labour market really is."
KEY INDICATORS: ** One-month non-deliverable rupee forward at 82.77; onshore one-month forward premium at 7.5 paise ** USD/INR NSE July futures settled at 82.5150 on Thursday ** USD/INR July forward premium at 5.5 paise ** Dollar index up at 103.14 ** Brent crude futures flat at $76.5 per barrel ** Ten-year U.S. note yield at 4.05% ** As per NSDL data, foreign investors bought a net $278.7mln worth of Indian shares on July 5
** NSDL data shows foreign investors bought a net $42.6mln worth of Indian bonds on July 5
