Rupee hit a record low, crossing 86 against the US dollar on Monday, following stronger-than-expected US jobs data.
The report hinted that the Federal Reserve might not reduce interest rates significantly this year, putting pressure on the rupee. It opened at 86.2050, weaker than Friday’s 85.9650.
Employers in the United States added 256,000 jobs last month, far exceeding the 160,000 jobs economists had predicted in a Reuters poll. Meanwhile, the unemployment rate dropped to 4.1%.
According to Morgan Stanley, this robust jobs report is likely to ease worries about potential weaknesses in the labour market, shifting the Federal Reserve’s attention back to inflation as it plans its next steps. The investment bank also said that the data reduces the chances of any immediate rate cuts by the Fed.
Current interest rate futures suggest that market participants expect only one rate cut from the central bank this year. Last year, the Fed lowered rates three times between September and December.
“For speculators who are already into bearish bets on the rupee, the U.S. job numbers provide one more reason to hold onto them. Having said that, I think we are now near levels where a number of negatives (for the rupee) are in the price. Plus, we are long overdue a decent correction,” a currency trader at a bank told Reuters.