MUMBAI, April 3 (Reuters) - The Indian rupee may weaken versus the U.S. dollar and bond yields are likely to rise this week, tracking a jump in oil prices on the back of an unexpected output cut by OPEC and its allies.
Saudi Arabia and other OPEC+ oil producers on Sunday announced further oil output cuts of around 1.16 million barrels per day, in a surprise move that analysts said would cause an immediate rise in prices.
Brent crude futures rose by as much as 8.3% on Monday to near $86.50. It pared a part of its rally and was last at $84.14. The dollar rose against Asian currencies.
"OPEC+ production cut adds strength to inflation woes and propels U.S dollar’s safe-haven demand," Kunal Sodhani, vice president at Shinhan Bank.
Meanwhile, the monthly U.S. jobs report due on Friday is seen as key to the near-term outlook for rupee and other Asian currencies.
The report is expected to show the world's largest economy added 240,000 jobs in March, according to economists polled by Reuters. The unemployment rate is projected to remain at 3.6% and average wages are pegged to increase 0.3% month-on-month.
With the U.S. banking turmoil easing, the focus is back on inflation and the Federal Reserve's rate outlook. The jobs report due this Friday and the inflation report, scheduled for April 12, will be crucial in gauging whether the Fed will hike rates at its next meeting in May or opt for a pause.
Rupee and bond traders also await the RBI's monetary policy decision, due on April 6. The central bank is expected to hike the repo rate by 25 basis points (bps), according to a Reuters poll of economists, who expect it to maintain its tightening stance.
The hike would likely be followed by a prolonged pause, according to the poll.
The rupee ended at 82.1650 on Friday. The currency declined 7.8% in fiscal 2023.
India's benchmark bond yield, ended at 7.3180% on Friday, posting its first monthly fall in four months. However, it jumped 48 bps for fiscal 2023.
Traders expect the benchmark yield to trade in the 7.28%-7.38% range during the week, and either end may be tested based on the central bank's monetary policy decision and guidance.
Bond yields on the longer end could rise gradually after the government announced its borrowing calendar for April-September, with more than 50% of the issuance dominated by 14-year and above maturity papers.
India aims to raise 8.88 trillion rupees ($108.05 billion) via the sale of bonds in April-September, with weekly auctions starting this week.
India's foreign exchange and debt markets will be shut on Tuesday and Friday due to public holidays.
KEY EVENTS: • India March S&P Global Mfg PMI - April 3, Monday (10:30 a.m. IST) • U.S. March S&P Global Mfg PMI - April 3, Monday (7:15 p.m. IST) • U.S. Feb JOLTS Jobs Openings - April 4, Tuesday (7:30 p.m. IST) • India March S&P Global Svcs PMI - April 5, Wednesday (10:30 a.m. IST) • India monetary policy decision - April 6, Thursday (10:00 a.m. IST) • U.S. March Non-farm Payrolls - April 7, Friday (6:00 p.m. IST) • U.S. March Unemployment Rate - April 7, Friday (6:00 p.m. IST) ($1 = 82.1860 Indian rupees) (Reporting by Nimesh Vora and Dharamraj Dhutia; Editing by Sonia Cheema and Janane Venkatraman)
