Robust U.S. Job Market Strengthens Dollar, Predicted to Influence Rupee Decline

Surge in US Weekly Jobless Claims Raises Concerns

The Indian rupee is anticipated to undergo a decline on Friday following a surprise decrease in the number of new unemployment claims in the U.S. last week. This development has bolstered the U.S. dollar and U.S. yields. Non-deliverable forwards suggest an opening of the rupee at around 82.06-82.08 to the U.S. dollar, compared to 81.9850 in the previous trading session.

Date: July 21, 2023

Place- New Delhi, India

The recent downturn in USD/INR was abruptly halted as the dollar begins to ascend, according to a forex trader. While the USD/INR pair will experience some demand at opening, the rest of the trading day is expected to be relatively calm. The rupee has maintained a consistent range of 25 paisa throughout the week.

The dollar index and U.S. yields experienced an uptick following the release of data pointing to a robust U.S. labor market. This reinforced the likelihood of the Federal Reserve implementing a rate increase after its July meeting. New claims for unemployment benefits saw a decrease of 9,000, bringing the total to 228,000 — the lowest since mid-May. This figure was lower than the 242,000 claims predicted by economists polled by Reuters.

The jobless claims data has sparked a reversal in the dollar’s trajectory, causing concern among investors that positive economic data could accelerate the rate hike cycle. This sentiment was shared by Srinivas Puni, the Managing Director at QuantArt Market Solutions.

The dollar index nearly hit 101 on Thursday, and the 2-year U.S. climbed to above 4.80%. A 25 basis point rate hike by the Fed is widely expected next week. However, if the U.S. labor market data continues to outperform expectations, there could be additional hikes in either September or November.

Key indicators include:

– One-month non-deliverable rupee forward at 82.14; onshore one-month forward premium at 8 paisa

– USD/INR NSE July futures settled at 81.9625 on Thursday

– USD/INR July forward premium at 2.25 paisa

– Dollar index at 100.74

– Brent crude futures increased by 0.9% to $80.4 per barrel

– Ten-year U.S. note yield at 3.85%

– According to NSDL data, foreign investors purchased a net of $267.2 million worth of Indian shares on July 19

– The same data indicates foreign investors sold a net of $21.4 million worth of Indian bonds on July 19.


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Money Control, Reuters, Economic Times