6 Nov 2023

USD post weekly loss as Fed rate peak looms

The USD weakened as the Federal Reserve paused its rate hikes, citing tighter financial conditions. The U.S. labor market slowed with 150,000 job additions, while India's forex reserves surged despite INR depreciation.

author dp
Team INRBonds
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  • The USD ended the week lower amid market expectations that the Federal Reserve has ended its rate-hiking cycle.
  • The Federal Reserve left interest rates on hold at a 22-year high for a second straight month and hinted that they have reached the end of the interest rate hiking cycle.
  • Federal Reserve Chair Jerome Powell acknowledged that high yields have tightened financial conditions, removing some of the need to raise interest rates further.
  • The U.S. labor market experienced a slowdown in October, with job growth significantly underperforming, according to the Labor Department's report. A total of 150,000 jobs were added, marking the smallest gain since June and falling short of the expected 180,000.
  • The unemployment rate rose to a two-year high of 3.9%, reflecting a cooling labor market. Average hourly earnings rose by 4.1% from a year ago, and labor force participation fell slightly to 62.7%.
  • The INR fell against the USD last week despite the fall in the USD as oil prices pushed higher.
  • India's foreign exchange reserves saw a significant increase, despite a notable foreign investor pullout, ending the week of October 27 with a total of USD 586.11 billion, a surge of USD 2.579 billion according to the Reserve Bank of India (RBI).

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