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Rupee made unsustainable come back against US Dollar in the Kerb

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Forex Research - Open Market Comments

Comparing to yesterday's trade Rupee made a massive recovery against US currency on the local desk today amid significant decline in dollar’s demand but it didn't last till the end.  The American dollar commenced new day’s trading at Rs.82/40, and gains 00/10 paisa against the National Currency i.e. Rs.80/50 at the close of markets on Friday. Thus, rupee ended the day on a negative versus dollar in the kerb. In the International Market the dollar recovers quite impressively yesterday, such recovery is not strong enough to change the short term down trend yet. Short term outlook in dollar remains bearish for the moment and all eyes will be focusing on whether today's Non-Farm Payroll report from US would restart the down trend or trigger a reversal. Economists expect US NFP to show -345k contraction in the job market in July while unemployment rate is expected to climb further from 9.5% to 9.6%.

The preview indicators generally support the expectations. Firstly, even though the ADP private employment report disappointed the markets on Wednesday, it did improved remarkably to -371k level. Employment components of the ISM indices also support lesser contraction in NFP. ISM manufacturing employment rose for another month to 45.6. While ISM services employment dropped back in July, it still managed to stay above 40 level at 41.5. After all, the preview data argues that NFP would likely be something between -300k and -400k and will probably be closer to -300k. The main question is on unemployment and as consumer confidence ended earlier rebound and dropped back to 46.6 in July, that may be a hint of a worse than expected unemployment rate. A slowing in the pace of U.S. job losses last month wasn’t enough to prevent the unemployment rate from climbing to a 26-year high, economists forecast a report today will show.

Employers probably cut 325,000 workers from payrolls in July after trimming 467,000 the prior month, according to the median of 82 estimates in a Bloomberg News survey. The unemployment rate likely rose to 9.6 percent from 9.5 percent. Companies from Boeing Co. to Verizon Communications Inc. continue to cut costs, signaling that a rebound in hiring will take time to develop even as Obama administration stimulus efforts take hold. A jobless rate that is projected to exceed 10 percent by early 2010, stagnant wages and falling home values mean a lack of consumer spending will curb an economic recovery. “The labor market is still bad,” said Nigel Gault, chief U.S. economist at IHS Global Insight in Lexington, Massachusetts. “Projects that create jobs will take a long time to ramp up. People are resigned to the idea of a jobless recovery and expectations for the consumer are really low.” The Labor Department’s report is due at 8:30 a.m. in Washington. Economists’ forecasts for payrolls ranged from declines of 150,000 to 460,000. Job losses peaked at 741,000 in January, the most since 1949. The July projection would bring total jobs lost since the recession began in December 2007 to 6.8 million, the biggest decline in any post-World War II economic slump.

Unemployment Forecasts
Estimates for the unemployment rate ranged from 9.2 percent to 9.8 percent, according to the survey. A separate Bloomberg survey last month showed unemployment may exceed 10 percent by early next year and average 9.8 percent for all of 2010. The Standard & Poor’s 500 Index, which reached a 12-year low on March 9, has since climbed 47 percent as evidence mounted the recession was easing. Declining pay is one reason economists project consumer spending, which accounts for 70 percent of the economy, will be slow to gain speed. Wages and salaries fell 4.7 percent in the 12 months through June, the biggest drop since records began in 1960, according to Commerce Department data issued this week. Companies like Verizon and Boeing are still looking to trim expenses through cutbacks in staff. New York-based telephone carrier Verizon last month said it plans to slash more than 8,000 jobs in the second half of the year. 10,000 Jobs

While dollar recovers quite impressively yesterday, such recovery is not strong enough to change the short term down trend yet. Short term outlook in dollar remains bearish for the moment and all eyes will be focusing on whether today's Non-Farm Payroll report from US would restart the down trend or trigger a reversal. Economists expect US NFP to show -345k contraction in the job market in July while unemployment rate is expected to climb further from 9.5% to 9.6%. The preview indicators generally support the expectations. Firstly, even though the ADP private employment report disappointed the markets on Wednesday, it did improved remarkably to -371k level. Employment components of the ISM indices also support lesser contraction in NFP. ISM manufacturing employment rose for another month to 45.6. While ISM services employment dropped back in July, it still managed to stay above 40 level at 41.5. After all, the preview data argues that NFP would likely be something between -300k and -400k and will probably be closer to -300k. The main question is on unemployment and as consumer confidence ended earlier rebound and dropped back to 46.6 in July, that may be a hint of a worse than expected unemployment rate.
 
 
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