RUPEE WATCH

The US Treasury yields, and the dollar index witnessed a sharp fall last week. The fall began after the outcome of the US Federal Reserve meeting on Wednesday.

The Fed left the interest rates unchanged at 5.25-5.5 per cent.

The central bank indicated that the rates will remain higher for more time as the inflation remains high. However, for now the Fed has ruled out the chances of increasing the rates again.

The fall in both the yields and greenback accelerated on Friday after the jobs data release.

The US added 175,000 jobs in its non-farm payroll. This was much lower than the market expectation for an increase of 240,000. The unemployment rate inched higher to 3.9 per cent in April from 3.8 per cent a month ago.

There is no major data release scheduled for this week. So, the Fed meeting outcome and the jobs data can continue to weigh on the dollar and Treasury yields for some more time.

Rupee has to break 83.30 to strengthen towards 83.10-83.00

LIMITED DOWNSIDE

The dollar index (105.03) has room to fall more from here. However, strong support is in the 104-103.50 region which can limit the downside. We expect the dollar index to reverse higher again from the 104103.50 region. Such a bounce will have the potential to take the dollar index up to 106-107 again.

MORE ROOM TO FALL

The US 10Yr Treasury yield (4.51 per cent) witnessed a sharp fall last week. It fell to test the 4.5-4.48 per cent support zone. Indeed, it extended the fall to 4.45 per cent before rising back to close the week at 4.51 per cent.

The yield can fall to 4.354.3 per cent in the near term. But the price action thereafter will need a close watch. A strong bounce from around 4.35-4.3 per cent and a subsequent rise past 4.5 per cent will be bullish. It can