NEW DELHI: The rupee appreciated 5 paise to 66.49 against the US dollar in early trade on Monday, despite mixed trading in Asian currency markets.
The domestic currency had closed at 66.54 against the US currency on Friday amid mild dollar selling by banks and exporters.
Less-than-expected payrolls data in the US released on Friday has diminished hope of a Fed rate hike in June. On the other hand, weak April trade data in China continued to raise concerns over the outlook for the world’s second largest economy.
Data showed US nonfarm payrolls rose by 160,000 in April. This was far lower than 202,000 that economists polled by Reuters had forecast. A Reuters’ survey following the jobs report showed Wall Street’s top bankers have all but abandoned any expectation that the Federal Reserve raising rates in June. Most now see the US central bank’s next rate hike coming in September.
This has strengthened chances of further rate cuts this year.
Christopher Wood, strategist at CLSA expects the RBI to cut the repo rate by further 50 basis points this year. According to Wood, the rupee should remain relatively stable and low beta in emerging market universe given that Governor Rajan is consciously targeting real interest rates in stark contrast to the negative rates being targeted by the G7 central bankers, ET reported.
Asian currencies such as the Korean won, the Indonesian rupiah and the Chinese yuan declined, while the Malaysian ringgit advanced in morning trade.
The dollar index, which measures the greenback against a basket of six major currencies, stood at 93.92. The index hit a recent high of 100.20 on November 30, 2015.
Angel Broking in a note said the dollar index is likely to stay pressurised going forward.
“One cannot forget the global economic slowdown which has led to anemic demand for goods and services. This has hampered the manufacturing and nonmanufacturing sector of the nation. House-hold spending has also declined thereby denting factory orders. Fall in crude oil prices has pushed the inflation rate into the negative territory which has prompted the US Federal Reserve to cut its projection for the number of 2016 rate hikes from four to two. Moreover, the economy of United States barely grew in the final three months of 2015,” it said.