MUMBAI: The rupee sank closer to the 86 level, recording its tenth consecutive week of decline against the dollar. The local currency closed at 85.97 against the greenback, down 12 paise from Thursdays’ close of 85.85. The rupee is likely to breach 86 levels on Monday with the dollar index surging sharply late evening after US non-farm payroll data came in much higher than expected.
“US jobs growth is much stronger than estimated. Unemployment down to 4.1%. 10 year US bond yields up to 4.77%. Reduces incentive for investors in equities or risk assets, if ” risk free” assets gives around 5% $ return. Emerging markets need to manage external accounts carefully” said veteran banker Uday Kotak on X.
Meanwhile, RBI‘s defence of the currency resulted in a continued decline of the country’s foreign exchange reserves. The week ended January 3, saw forex reserves decline by $5.7 billion to a 10-month low of $634.6 billion – its fifth straight week of decline. Forex reserves had touched a high of $704.9 billion in late September.
The rupee has been under pressure because of foreign portfolio investors selling equities in the stock markets. “Forex market is looking for non-farm payroll data, which is an important source of employment information. If there is an improvement, the dollar index could rise and result in a gap opening on Monday,” said KN Dey, a forex consultant. The new governor at the RBI Sanjay Malhotra completed one week in office this week. With Malhotra yet to speak publicly, the markets are speculating on his stance on growth, inflation and the exchange rate.