MUMBAI: The Indian rupee is set for a quiet open on Friday, with Asian currencies largely absorbing the latest bout of risk-off sentiment, supported by a slide in U.S. Treasury yields.
The 1-month non-deliverable forward indicated the rupee will open largely unchanged versus the US dollar, having settled at 88.7050 on Thursday.
U.S. equities extended their recent slide despite an initially positive read on earnings, with the S&P 500 falling 1.6% amid renewed concern about tech valuations.
Most Asian currencies were marginally higher despite the weak risk tone in markets, while the dollar index dipped.
The release of the delayed U.S. September jobs report offered little clarity for investors on the Federal Reserve’s path : while headline job additions beat expectations, an uptick in the unemployment rate and softer revisions to prior months muddied the outlook.
“Despite a downward revision to the August print.. the new data clearly accelerates the 3-month average payrolls. As a result, our economists no longer forecast a Fed cut in December,” Morgan Stanley said in a note.
Market pricing of the odds of a December Fed rate cut were little changed from before the previous day, at 1-in-3.
Although there’s plenty to mull from global cues, “Asian currencies are not reacting much and all know RBI will likely be camped near 88.80 again,” a currency trader at a private sector bank said.
With that in place, it’s hard to see rupee volatility picking up “in any meaningful way”, he added.
The Reserve Bank of India has been defending the 88.80 level for several weeks. Its presence has effectively turned 88.80 into a soft cap on the pair, anchoring near-term price action, bankers say.
Governor Sanjay Malhotra said at an event, on Thursday that India’s foreign reserves offer “ample protection” for the currency, while attributing recent weakness to higher dollar demand which he said could abate if India and the U.S. agree a trade deal.
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