Rupee nearly flat, tracking subdued Asia FX; forward premiums retreat
MUMBAI: The Indian rupee was nearly unchanged on Monday, tracking muted moves in Asian currencies, while dollar-rupee forward premiums eased after stronger-than-expected US labour market data dented hopes of rate cuts by the Federal Reserve.
The rupee was at 85.6175 against the US dollar as of 11:00 a.m. IST, little changed from its close at 85.6250 in the previous session.
The dollar index was hovering just shy of the 99 handle after rising nearly 0.5 per cent on Friday, boosted by upbeat US jobs data which gave investors some relief following bleak US economic data last week.
"The most likely near-term catalyst for USD upside lies in the ongoing US data resilience or even a reacceleration, even if temporary," BofA Global Research said a note.
The jobs data also pegged back hopes of Fed rate cuts, with interest rate futures now pricing in 60 per cent odds of a reduction in or before September, compared to nearly 75 per cent before the report was released, according to the CME Group's FedWatch Tool.
The scaling back of expectations pushed up near-tenor US bond yields, weighing on dollar-rupee forward premiums, with the 1-year implied yield declining to 1.78 per cent, its lowest level since July 2024.
Meanwhile, the BSE Sensex and Nifty 50 - India's benchmark equity indexes - rose 0.5 per cent each on the day, tracking gains in regional equities.
The focus on Monday will be on talks aimed at mending a trade rift between the United States and China. The discussions are expected to focus on critical minerals, whose production is dominated by China.
In April, China had decided to suspend exports of a wide range of rare earths and related magnets. The curbs have upended supply chains crucial to automakers, aerospace manufacturers, semiconductor companies and military contractors.
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