Rupee sits at one-month low against US dollar; may depreciate further to 83, say analysts
US Federal Reserve would be more aggressive than expected in increasing interest rates this year. The local currency fell to the levels of 82.66 to a dollar, its lowest since May 30. It has weakened by nearly 0.84% against the American currency so far this week.
Analysts remain bullish on the dollar due to risk-aversion amid rising expectations of hawkish monetary policy by the US Federal Reserve. They expect the local currency to further fall towards 83 - 83.30 levels going ahead. “The fear that the US Federal Reserve may continue to begin aggressive rate hikes has led to a sharp depreciation in INR, especially after US ADP data surprisingly came better than expected.
The forex market is reacting to the tight labour market in the US amid hopes that even today’s US NFP data may come higher than market expectations," said an economist with a private bank. Data showed private payrolls in the US surged surprisingly last month, while the number of Americans filing new claims for unemployment benefits increased only moderately last week, suggesting a robust jobs market. Also Read: Will the rupee emerge as a global currency? US 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 the US services sector expanded at an accelerated pace in June. Surprisingly strong jobs data helped push short-dated Treasury yields to their highest since 2007, reflecting the view that the Fed is likely to keep raising rates to tame inflation. Moreover, the gains in USDINR spot also came amid improving importers demand.
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