Rupee extends drop, seen at levels attractive to exporters

economictimes.indiatimes.com:

rupee declined on Friday to its lowest level in a month on worries that the U.S Federal Reserve will need to hike rates more than what was previously expected. The rupee was at 82.66 to the U.S dollar, down from 82.51 in the previous session and at the lowest since May 31. «It is not about the July hike anymore.

It looks like the Fed will again hike in either September or November,» a forex spot trader said. «Rupee and other currencies will need to price that in. Having said that, we are now at levels that should see exporters turning quite active.» 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. Meanwhile, a report from the Institute for Supply Management (ISM) showed that U.S. services sector expanded at an accelerated pace in June.

Markets have now fully accounted for a 25 basis points Fed rate hike at this month's meeting. U.S. yields jumped and equities retreated.

Focus now turns to the June U.S non-farm payrolls data due later in the day. Investors will be waiting to see if NFP data is consistent with private payroll numbers. The two-year yield rose above 5% mark, while the 10-year yield was above the 4% handle.

ANZ Research pointed out that the correlation between NFP and ADP has been «a bit hit and miss of late». Tracking the higher U.S. yields, rupee forward premium dropped with the 1-year at lowest level since 2009.