Written by Dharamraj Dutia and Jaspreet Kalra
Mumbai, March 11 (Reuters) – The Indian rupee may look to further accelerate its recent gains on the back of a weaker dollar, and will look to domestic and U.S. inflation data for clues, while government bond yields will track movements in U.S. Treasury yields.
The local stock closed at 82.7850 on Thursday after rising to a six-month high during trading. The rupee rose 0.1% last week, marking the fourth straight week of gains.
Indian financial markets were closed on Friday due to local holidays.
The dollar index ended the week 1.1% lower, its steepest weekly decline since December, after Fed Chairman Jerome Powell said it was “not long” before the central bank gained confidence to cut interest rates.
A mixed February jobs report also weighed on the dollar, keeping the possibility of a June interest rate cut alive.
Nonfarm payrolls rose by 275,000 last month, exceeding the 200,000 expected by economists polled by Reuters. However, the unemployment rate rose to 3.9% in February after remaining at 3.7% for three months.
“We believe the job market is likely to cool further and a June interest rate cut remains likely,” ING Bank said in a note. Data for January was also revised downwards to show that 229,000 jobs were created, instead of 353,000 as previously reported.
Arnob Biswas, head of foreign exchange research at SMC Global Securities, said, “Technically, the USD/Indian rupee bias remains negative, with the weekly range likely to be 82.60-82.90 yen. is high,” he said.
U.S. consumer inflation data released on Tuesday will further shape expectations for Fed rate cuts.
Traders are also keeping an eye on the Reserve Bank of India's $5 billion USD/INR buy/sell swap expiry on Monday, which will impact overnight USD/INR swap rates and forward premiums. .
On the other hand, India's 10-year government bond yield is IN071833G=CC It ended Thursday at 7.0312%, down 3 basis points for the week. Traders expect the index to remain in the range of 7.00-7.08% this week.
Indian government bond yields fell last week, following a decline in U.S. yields, but 10-year bond yields fell further following the U.S. jobs report.
Meanwhile, foreign investors continue to pour money into Indian government bonds, and while being included in another index won't change things much, sentiment is rising.
bloomberg index service will include domestic government bonds invested through the country's fully accessible route (FAR) in the Emerging Markets Local Currency Index (EMLC) from January 31, 2025.
However, what market participants expect is inflow The yield on the inclusion is less than $5 billion, and the yield was little changed last week.
Anurag said: “While this is not significant in itself, it is a strong setup for the potential addition of Indian government bonds to the Bloomberg Composite Index. This could lead to an inflow of more than Mittal, head of fixed income at UTI Asset Management Company, said:
Investor attention will also turn to India's February retail inflation report on Tuesday, especially as the central bank reiterates its intention to achieve its medium-term inflation target of 4% on a sustainable basis. right.
India's consumer price inflation rate is expected to decline slightly to 5.02% in February, the lowest in four months, as food price increases are brought under control. Reuters survey of economists. However, inflation has remained above 4%, the midpoint of the central bank's tolerance range, since September 2019.
Key events: ** India February CPI Inflation – Tuesday, March 12 (5:30 p.m. ET) (Reuters Poll, 5.02% YoY)
** India January Industrial Production – Tuesday, March 12 (5:30 p.m. ET) (Reuters Poll, 4.1% YoY)
** U.S. February CPI – Tuesday, March 12 (6:00 p.m. ET) (0.3% m/m in Reuters poll)
** India January WPI Inflation – Thursday, March 14 (12:00 PM ET) (Reuters poll, 0.25% YoY) ** U.S. First Weekly Unemployment Claims Week Ending March 4 – Thursday, March 14th (6pm IST) ** US February PPI Machine Manufacturing – Thursday, March 14th (6pm IST) ** US February Retail Sales – Thursday, March 14th (6pm IST)
** US February Import Prices – Friday, March 15th (6pm IST)
** US February Industrial Production – Friday, March 15th (6:45pm IST)
**February US sentiment – Friday, March 15th (7:30pm IST)
(Reporting by Dharamraj Dhutia and Jaspreet Kalra; Editing by Sonia Cheema)
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