Rupee to weaken slightly as US yields rise and Fed signals cautious stance

Rupee to weaken: The Rupee is poised for a modest opening dip on Friday, influenced by robust US jobless claims data that led to higher US bond yields. 

A Federal Reserve official's reiterated caution regarding potential rate cuts further contributes to the cautious market sentiment.

Non-deliverable forwards suggest an opening around 83.15-83.16 to the US Dollar, compared to the previous closing at 83.1225. 

The Dollar Index is slightly lower at 103.33, while most Asian currencies remain steady, except for a marginal 0.3 per cent uptick in the Korean won.

With a broadly range-bound outlook for the day, the Rupee's support is expected to hold near 83.20-83.25, according to a trader at a private bank. 

However, potential equity outflows could exert pressure on the Rupee, making it a crucial factor to monitor in the coming days.

In January, overseas investors net sold Indian equities worth $463 million, following net purchases of $7.9 billion in December.

The 10-year US Treasury yield rose to 4.16 per cent in Asia, increasing 4 basis points overnight in New York due to weaker-than-expected initial jobless claims data. 

Unemployment claims dropped to 187,000 for the week ended Jan. 13, well below the expected 207,000 claims.

DBS Bank noted, “These numbers point to a still firm labour market...factor in a rebound in (US) housing starts and firm retail sales from the day before, it becomes difficult to make a case for aggressive rate cuts this year.”

Atlanta Federal Reserve President Raphael Bostic said that premature rate cuts "could unleash a surge in demand," exerting upward pressure on prices. Bostic remains open to early cuts if data convincingly signals a faster-than-expected decline in inflation.

(With Reuters Inputs)