MUMBAI: The Indian rupee is expected to do well on Friday in the wake of the dollar’s decline before a jobs report that is likely to hold cues on whether the Federal Reserve will cut interest rates later this year.
Non-deliverable forwards indicate the rupee will open higher to flat to the US dollar against 83.4925 in the previous session.
“It will largely be a rangebound kind of a day with a marginal downward bias (on dollar/rupee pair),” a currency trader at a bank said.
“The dollar index has fallen more, plus yesterday was a disappointing day (for dollar/rupee long positions).”
The rupee on Thursday dipped to 83.56 before managing to recover. The local currency’s range over the last three days has shrunk to roughly 83.40-83.55.
The dollar index dropped in Asia trade, extending its recent decline. Upbeat risk appetite and mostly soft US data have prompted the dollar index to retreat from a near two-month high of about 106.10 hit last week.
The US jobs report due later in the day will likely play a key role in shaping the dollar’s near-term direction.
Whether the Fed will cut rates at the September meeting is what investors are debating right now, and the jobs report will impact their expectations on this.
Indian rupee ends little changed
The data comes on the back of comments by Fed Chair Jerome Powell that emphasized the US central bank’s dual mandate and indicated that any unexpected weakness in labour market would not be welcome.
“A weaker labour market from here could bring the Fed into play – this, therefore, puts additional weight on the unemployment rate, which is part of Friday’s US payrolls report,” Chris Weston, head research at broker Pepperstone, said in a note.
Futures are currently pricing in two Fed rate rates in 2024.
American Dollar Exchange Rate