Rupee poised with upside bias despite surge in US Treasury yields- Republic World

Rupee opening: Despite a robust US labour market report driving a surge in US Treasury yields, the Indian Rupee is anticipated to maintain an upward bias on Monday.

According to non-deliverable forwards, the Rupee INR=IN is expected to open slightly higher-to-flat against the US Dollar compared to its previous session close of 83.2950.

The local currency experienced a turnaround on Friday, rebounding from a record low of 83.4550. Traders attribute this recovery to expectations that the Reserve Bank of India will intervene to prevent a significant slide in the Rupee, coupled with a reduction in Dollar demand related to currency futures.

An FX trader at a bank noted, “Friday’s market movements will undoubtedly influence today’s opening. However, we do not anticipate a significant drop in the Rupee.”

Despite higher US yields, Asian currencies have not experienced substantial declines, and equities remain relatively stable.

The 2-year US yield surged on Friday, particularly during Asian trading hours, following a report indicating more jobs were created in the world’s largest economy than anticipated last month. This prompted investors to lower expectations of a rate cut at the Federal Reserve’s June meeting.

The probability of a June rate cut now stands at less than 50 per cent, with investors pricing in just 60 basis points of rate cuts this year, lower than the 75 bps indicated by the Fed’s dot plot.

James Knightley, chief international economist at ING Bank, remarked, “Interest rate cut expectations have unsurprisingly receded following the jobs data. The prospect of a June rate cut now looks slim.”

Attention now shifts to US inflation data scheduled for release on Wednesday, which is expected to influence market sentiment further.

(With Reuters inputs.)