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USD/INR hits one-month high after hawkish FOMC minutes

Key points

  • USD/INR at fresh one-month peak
  • Latest FOMC minutes release suggests more rate hikes likely
  • US labor market, services PMI data in focus

India’s Rupee registered a fresh one-month low on Thursday on the back of a stronger US Dollar and a surge in US bond yields.

Asian currencies retreated after the minutes of the Federal Reserve’s June meeting showed that some FOMC members voted in favor of raising interest rates by 25 basis points.

All FOMC participants continued to maintain the view that a restrictive policy stance would be appropriate, with inflation remaining well above the Fed’s 2% inflation target and US labor market still very tight.

Almost all FOMC members saw the need for more rate increases this year, the minutes showed.

“The key element to the June FOMC minutes seems to be that ‘almost all’ officials thought more tightening would be needed this year,” ING Bank analysts wrote in an investor note.

The Federal Reserve kept the target range for the federal funds rate unchanged at 5.00%-5.25% last month, while Fed Chair Jerome Powell has on several occasions stressed on the need to raise borrowing costs further this year.

The yield on US 10-year Treasury Notes was last at 3.955%, or the highest since March 9th.

Market players will be paying close attention to key US job openings and private payrolls reports, due out later on Thursday, for more clues over the state of the nation’s labor market.

Additionally, the ISM Services PMI data will provide insight into a key GDP-generating sector.

As of 7:15 GMT on Thursday USD/INR was edging up 0.19% to trade at 82.5250. During the early phase of the European trading session, the exotic Forex pair went up as high as 82.5450. The latter has been the pair’s strongest level since June 9th (82.5625).

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