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USD/INR loses momentum, all eyes on the US NFP data

November 3, 2023| Forex Market


  • Indian Rupee trades strongly amid the risk-on mood, lower US yields.
  • India’s Chief Economic Advisor said RBI’s policy will not be influenced by Fed’s tightened policy and the differential in bond yields.
  • Market players will closely monitor the US Nonfarm Payrolls (NFP), due later on Friday.

Indian Rupee (INR) remains firm on Friday, backed by the risk-on mood and a fall in the US Treasury bond yields. India’s Chief Economic Advisor (CEA) V. Anantha Nageswaran said on Thursday that the Reserve Bank of India (RBI) would not be forced to tighten monetary policy even if the US Federal Reserve (Fed) raised interest rates further.

Nageswaran further stated that financial stability was considerably stronger than it was ten years ago. Furthermore, he said that the RBI’s policy would be mainly determined by domestic factors and would not be impacted by the differential in bond yields.

Investors will keep an eye on the US employment data later on Friday, including US Nonfarm Payrolls (NFP), Average Hourly Earnings, and the Unemployment Rate. The highly-anticipated NFP is expected to add 180K jobs in October, while the Unemployment Rate is expected to remain steady at 3.8%. The stronger-than-expected data might cap the downside of the USD/INR pair.

Daily Digest Market Movers: Indian Rupee gains ground, USD weakens ahead of the key data

  • Reserve Bank of India (RBI) Deputy Governor, M. Rajeshwar Rao, underscored the critical role of regulations in ensuring the stability and growth of the financial sector.
  • India’s Chief Economic Advisor (CEA), V. Anantha Nageswaran, stated that RBI would not need to raise the interest rates even if the Federal Reserve (Fed) tightens its monetary policy further.
  • Traders will monitor the debt sales, as India plans to sell its longest-duration bond on Friday, which is expected to see strong demand.
  • RBI announced the launch of the ‘Inflation Expectations Survey of Households’ and the ‘Consumer Confidence Survey,’ which would provide key inputs for the bi-monthly monetary policy.
  • Geopolitical risks are India’s biggest challenge, but RBI Governor Das believes India is better positioned than other nations to cope with any potentially risky situation.
  • The Federal Open Market Committee (FOMC) maintained the interest rate unchanged at its November meeting, as widely expected.
  • Markets are confident that the Fed is nearing the end of its tightening cycle.
  • US weekly Initial Jobless Claims for the week ending October 27 climbed by 217K versus 212K prior, better than expected.
  • US Factory Orders came in at 2.8% MoM in September, above the market consensus of 2.3%.
  • The US Unit Labor Cost for the third quarter (Q3) dropped by 0.8% from the previous reading of a 2.2% rise, below the expectation.

Technical Analysis: Indian Rupee trades firmly, but bearish bias stays intact

The Indian Rupee continues gaining ground on the day. The USD/INR pair trades in a familiar range of 83.00–83.35 since September. USD/INR maintains a bullish vibe despite the latest pullback as the pair holds above the key 100- and 200-day Exponential Moving Averages (EMA) on the daily chart.

The critical resistance level for the pair will emerge near the upper boundary of the trading range at 83.35. A break above 83.35 will see a rally to the year-to-date (YTD) highs of 83.45. Further north, the next upside stop to watch is a psychological round mark at 84.00.

On the other hand, the confluence of a low from October 24 and a round level marked at 83.00 acts as a key contention for the pair. Any weakness below the latter will see losses extend to a low of September 12 at 82.82, followed by a low of August 4 at 82.65.

US Dollar price this week

The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the strongest against the Japanese Yen.

USD   -0.59% -0.72% -0.90% -1.45% 0.42% -1.48% 0.36%
EUR 0.58%   -0.14% -0.31% -0.86% 1.00% -0.88% 0.95%
GBP 0.72% 0.14%   -0.20% -0.73% 1.14% -0.76% 1.08%
CAD 0.91% 0.30% 0.17%   -0.55% 1.30% -0.58% 1.24%
AUD 1.43% 0.86% 0.73% 0.52%   1.86% -0.03% 1.81%
JPY -0.42% -1.01% -1.06% -1.36% -1.89%   -1.92% -0.06%
NZD 1.47% 0.88% 0.74% 0.57% 0.03% 1.87%   1.83%
CHF -0.37% -0.96% -1.09% -1.27% -1.83% 0.05% -1.85%  

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).

Nonfarm Payrolls FAQs

Nonfarm Payrolls (NFP) are part of the US Bureau of Labor Statistics monthly jobs report. The Nonfarm Payrolls component specifically measures the change in the number of people employed in the US during the previous month, excluding the farming industry.

The Nonfarm Payrolls figure can influence the decisions of the Federal Reserve by providing a measure of how successfully the Fed is meeting its mandate of fostering full employment and 2% inflation.
A relatively high NFP figure means more people are in employment, earning more money and therefore probably spending more. A relatively low Nonfarm Payrolls’ result, on the either hand, could mean people are struggling to find work.
The Fed will typically raise interest rates to combat high inflation triggered by low unemployment, and lower them to stimulate a stagnant labor market.

Nonfarm Payrolls generally have a positive correlation with the US Dollar. This means when payrolls’ figures come out higher-than-expected the USD tends to rally and vice versa when they are lower.
NFPs influence the US Dollar by virtue of their impact on inflation, monetary policy expectations and interest rates. A higher NFP usually means the Federal Reserve will be more tight in its monetary policy, supporting the USD.

Nonfarm Payrolls are generally negatively-correlated with the price of Gold. This means a higher-than-expected payrolls’ figure will have a depressing effect on the Gold price and vice versa.
Higher NFP generally has a positive effect on the value of the USD, and like most major commodities Gold is priced in US Dollars. If the USD gains in value, therefore, it requires less Dollars to buy an ounce of Gold.
Also, higher interest rates (typically helped higher NFPs) also lessen the attractiveness of Gold as an investment compared to staying in cash, where the money will at least earn interest.

Nonfarm Payrolls is only one component within a bigger jobs report and it can be overshadowed by the other components.
At times, when NFP come out higher-than-forecast, but the Average Weekly Earnings is lower than expected, the market has ignored the potentially inflationary effect of the headline result and interpreted the fall in earnings as deflationary.
The Participation Rate and the Average Weekly Hours components can also influence the market reaction, but only in seldom events like the “Great Resignation” or the Global Financial Crisis.

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