By Nimesh Vora
MUMBAI, Feb 7 (Reuters) - The Indian rupee was barely
changed against the dollar on Tuesday, ahead of Federal Reserve
Chair Jerome Powell's speech that will draw extra scrutiny on
the back of an upbeat U.S. jobs report.
The rupee was at 82.7325 to the U.S. dollar by
09:54 a.m. IST, after tumbling about 1% to 82.7250 on Monday.
That was the currency's worst session in more than four
months, fuelled by the jobs report on Friday that prompted
investors to have a re-look at how high the Fed is likely to
raise interest rates.
"The unexpected surge in U.S. jobs number has taken markets
by surprise," said Srinivas Puni, managing director at QuantArt
Market Solutions.
"USD/INR is now firmly in a higher range, with a bias
towards reaching the 83 level."
Powell's speech later in the day will invite scrutiny in the
wake of futures pricing a higher Fed terminal rate since the
jobs report.
Powell, in last week's post-policy meeting press conference,
outlined a potential scenario where inflation declines without a
material rise in unemployment, ING Bank said.
"We'll see how much confidence he has in this scenario
(now)."
Before the jobs report, traders were pricing in a peak rate
of 4.9% and about 50 basis points (bps) of rate cuts this year.
Now, the peak rate pricing has climbed to 5.12%, while rate cuts
expectations have fallen to about 32 bps. Underscoring the impact of the jobs report, Atlanta Fed
President Raphael Bostic said on Monday that the Fed may need to
lift borrowing costs higher than previously anticipated.
The Fed could consider raising rates by half a percentage
point, though that is not his base case, Bostic told Bloomberg
News.
The rupee forward premiums were marginally lower, with the
1-year implied yield at 2.12% on the back of the hawkish Fed
view.
(Reporting by Nimesh Vora)
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