Dollar to continue strengthening: Seth Freeman

Seth Freeman, EM Capital Management in an interview to CNBC-TV18 shared his readings and outlook on the US jobs data, currency and its impact going forward.According to him the dollar will continue strengthening going forward, which might not be good for the rupee.Job growth cooled in August, with nonfarm payrolls adding just 142,000 even as the unemployment rate fell to 6.1 percent, according to the Labor Department.Below is the transcript of Seth Freeman's interview with Ekta Batra & Nigel D'Souza on CNBC-TV18.Nigel: What is your reading of the data; in fact it came in much lower than estimates and what do you expect the Fed to do when they meet later this month?A: The jobs data shouldn’t be such a surprise because lots of people go on vacation and when you are not looking for a job, you don’t get counted. So, on net-net basis we had weaker type of net new job growth. We still need to get granular and look at the underlying jobs themselves; from other research that I read, a vast majority of the jobs are not professional jobs or true middle income, middleclass jobs; they are mainly low income service industry jobs. So that’s good to put people back to work but it doesn’t necessarily mean there are economies going to be buzzing ahead because of these new jobs.In terms of what the Fed might do. I think we are going to just continue getting signals to anticipate interest in adjustment but I do not expect that to happen to sometime in mid 2015. Mortgage rates went down a bit about a quarter point these last two weeks, indicating the 10-year rate which is used as the benchmark for mortgages here in United States is still pretty low.

Ekta: Would it be fair to assume that you see the non-farm payroll data that came out on Friday as an outlier and maybe it won’t change the stance of the Federal Open Market Committee (FOMC) especially in their latest meet in September?A: I do not know if it is necessarily an outlier. We will know better in September. The day after Labour Day represents the end of the summer season and people either begin working again or try to get new job before the end of the year. So, we have to wait and see; it could be a trend. However, when we look at the jobs data, these are all preliminary numbers and they end up getting readjusted by two months after the original announcement and that doesn’t get that much attention. It is very common for the rosier job numbers to be adjusted downward two months later.Nigel: What about currency space. We have seen that the dollar has been strengthening across most currencies; going long dollar has been beneficial. Where do you see the dollar headed from here and what could be the impact on Indian currency?A: I think the dollar will continue strengthening particularly depending on what the European Central Bank does. I think that this poses some problems for India because we are seeing crude oil prices go down but at the same time crude is priced in dollars. So even though the underlying oil price goes down, and the dollar goes up, it could be totally offset or even worse. I am hoping to see the next year the rupee begins to recover.

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