UST yields higher after jobs report
USD traded higher last week tracing higher UST yields but fell in the later part of the week following an agreement in Washington over the US debt ceiling and amid a huge miss in the US non-farm payroll report.
Just 194,000 jobs were added in the US in September. This was well short of the 500,000 expectation and down from the upwardly revised 366,000 from August. The unemployment rate fell to 4.8% down from 5.2%. Meanwhile, average earnings jumped 0.6%, up from 0.4%. The data comes as there are 11 million vacancies in the US suggesting that this is very much a supply-side issue rather than demand.
The weak number is unlikely to prevent the Fed from moving towards tapering bond purchases next month. In fact, the high levels of demand and weak supply could push wage growth up further creating greater inflationary pressures, meaning the Fed could be forced to raise interest rates sooner than expected. The yield on the benchmark 10-year UST bond topped the 1.60% level, hitting its highest level since June 4.
INR falls as RBI stays pat
INR ended the week lower as the RBI kept monetary policy unchanged on Friday. Interest rates remain at 4% for the reop rate, as expected. The central bank reiterated the need to unwind stimulus very gradually in order to support the economic recovery.
RBI also lowered its full-year FY22 retail inflation projection to 5.3% from 5.7%. However, the RBI maintained its full-year economic growth forecast at 9.5% as consumer spending is expected to pick up in the upcoming festival season.
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