The Indian rupee fell to a one-month low on Friday on concerns that the US Federal Reserve would need to raise interest rates more than previously expected.
The rupee fell to 82.66 rupees to the dollar, down from 82.51 rupees in the previous session, the lowest since May 31.
“It’s no longer about a July rate hike,” said one forex spot trader.
“The rupee and other currencies will have to factor in that. That being said, we are currently at levels where exporters should be quite active.”
The ADP National Employment Report showed that the number of private sector jobs in the US rose by 497,000 last month, well above expectations and further evidence of the resilience of the labor market.
Meanwhile, the US services sector expanded at an accelerated pace in June, according to a report by the Institute for Supply Management (ISM).
Markets are now fully pricing in a 25 basis point rate hike by the Fed at this month’s meeting.
U.S. yields soared and stocks fell. The focus now turns to the US nonfarm payrolls for June, which will be released later in the day. Investors will be waiting to see if the NFP data matches private sector salary figures.
Yields on two-year Treasuries broke above the 5% level and yields on 10-year notes rose above the 4% handle.
ANZ Research noted that the correlation between NFP and ADP “has been somewhat hit or miss these days.”
Rising U.S. yields pushed the rupee’s forward premium down to its lowest one-year rate since 2009. (Reported by Nimesh Bora)