Rupee opens weak after superlative US Jobs data

Rupee opens weak after superlative US Jobs data

09 Dec 2019 09:19 AM

USD/INR – The Indian rupee opened weak vis-a-vis the dollar at 71.29 compared to Friday’s close of 71.19, after the world’s largest economy added more jobs last month than expected, lifting the dollar index and Treasury yields. Persistent dollar inflows, however, would help limit the rupee’s losses. Rupee might not see much of weakness following the U.S. jobs data. There is sufficient speculative dollar-selling interest at higher levels on the pair. In addition to speculative flows, corporate flows, too, remain in favor of the rupee. Moreover, the impact of the dollar index’s rally on Asian currencies has not been much.” The dollar index had its best session in a month on Friday and the 10-year Treasury yields climbed to the highest in three weeks after data showed that U.S. employers added 266,000 jobs last month, significantly better that 180,000 expected by economists polled by Reuters. In addition, jobs creations for October were revised higher. The unemployment rate fell to 3.5%, while average earnings grew by 3.1% year-on-year. Morgan Stanley said it was an “across the board” robust report and will be “well received” by Federal Reserve policymakers ahead of their two-day meeting that begins tomorrow. The Fed is likely to affirm its message that the U.S. economy and monetary policy are “in a good place” and the bar for changes in the policy stance is high, it added. On Friday, the S&P 500 had its best session in more than a month following the jobs data. Asian equities advanced today, but underperformed their U.S. peers amid an expected drop in Chinese exports. Data released yesterday showed that dollar-denominated exports declined by 1.1% from a year earlier against expectations of a 1% increase. Imports were up 0.3%. The offshore Chinese yuan dropped 0.1% at 7.0306 to a dollar in Monday trading. The Shanghai Composite was little changed.

EUR/USD – The dollar held firm on Monday after economic data showed surprise strength in the U.S. jobs market, but the currency was restrained from moving higher by worries about an escalation in the U.S.-China trade war. The dollar index stood almost flat at 97.706 in morning Asian trade, after rising 0.3% on Friday. The euro traded at 1.10575, after hitting a one-week low of 1.10395 on Friday. U.S. nonfarm payrolls added far more jobs than market expectations last month, the biggest gain in 10 months, while the unemployment rate ticked back down to 3.5%, its lowest level in nearly half a century. Those figures suggested the Trump administration's 17-month trade war with China, which has plunged manufacturing into recession, has not yet spilled over to the broader U.S. economy. Still, investors think that could change if trade tensions escalate further, especially if Trump goes ahead with planned tariffs on some $156 billion worth of products from China from Dec. 15. The market has been largely working on the assumption that those tariffs, which cover several consumer products such as cellphones and toys, will be dropped or at least postponed, given that Washington and Beijing agreed in October to work on a trade deal. Top White House economic adviser Larry Kudlow confirmed on Friday that the Dec. 15 deadline to impose the new tariffs remains in place, but added that President Donald Trump likes where trade talks with China are going. China's exports shrank for the fourth consecutive month in November, underscoring pressures on manufacturers from the Sino-U.S. trade war.

GBP/USD – Sterling was trading flat around the 1.3140 mark in early Asian trade after closing off 0.2%, as the USD bounced after superlative US payrolls data. British Prime Minister Boris Johnson's Conservative Party extended its lead over the Labour Party to 14 percentage points, up from 9 percentage points a week ago, an opinion poll by Survation for ITV's Good Morning Britain showed on Monday. The poll put Johnson's party on 45%, up 2 points, compared to Labour's 31%, down 2 points, before Thursday's national election. The poll also showed that 52% of respondents would consider voting tactically, versus 44% who said they would not. The telephone poll of 1,012 respondents was conducted between Dec. 5 and Dec. 7. Respondents were read out the names of the parties and candidates that are standing in their own constituency. Johnson will be happy with the weekend polls, as his lead extends. GBP gained substantially last week - primarily discounting an expected Boris Johnson win - buy the rumour sell the fact? Johnson remains a strong favourite at the bookmakers to be next British PM.

USD/JPY – The dollar changed hands at 108.58 to a Yen on Monday morning. It had lifted to 108.92 yen on Friday before losing momentum after the U.S. jobs data. Japan's economy expanded at a much faster pace than initially reported in the third quarter, as resilient domestic demand and business spending offset the hit to growth from falling exports and global trade tensions. Gross domestic product grew an annualized 1.8% in July-September, stronger than the preliminary reading of 0.2% annualized growth, Cabinet Office data showed Monday. The firmer growth marked the fourth consecutive quarter of expansion and also beat economists' median forecast for a 0.7% gain. It was mostly driven by improvements in capital expenditure and private consumption. However, analysts say the third quarter strength, which was the weakest growth seen this year, masks some fragility that could to lead to a much weaker performance going forward. "While Japan's economy expanded more rapidly ahead of October's sales tax hike than initially estimated, output is set to shrink in 2020," said Marcel Thieliant, senior Japan economist at Capital Economics. "The main reason for the upward revision was that non-residential investment jumped by 1.8% on-quarter instead of the preliminary estimate of 0.9%," he wrote in a note. Behind the big headline increase was strong investment from non-manufacturers, such as retailers, said Takeshi Minami, chief economist at Norinchukin Research Institute.


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