MUMBAI: The Indian rupee gave up modest early gains to trade little changed on Friday ahead of crucial key U.S. labour market report due later in the day.
The U.S. dollar slipped against most Asian currencies while Treasury yields dipped to their lowest in four months on strong wagers on a rate cut by the Federal Reserve later this month.
The rupee was at 88.1650 against the dollar, against its close at 88.1450 in the previous session.
The interest-rate expectation sensitive 2-year U.S. Treasury yield fell to a four-month low in Asia trading, extending its decline to 3.59%.
Money markets are currently pricing in near certainty of a 25-basis-point rate cut by the Fed in September.
The wagers were cemented by indications of weakness in U.S. labour data released on Thursday.
“A negative surprise or sharp downward revision to July’s figure could put downward pressure on the USD,” MUFG said in a note, referring to the jobs report.
While a soft print may offer modest relief to the rupee, a rally is unlikely unless equity flows pick up meaningfully or there are positive developments related to U.S. tariffs, a trader at a state-run bank said.
Indian exports to the U.S. face a tariff of as much as 50%.
MUFG reckons the rupee could weaken to 89 by the first quarter of calendar year 2026 under the assumption that the steep tariffs remain for now but are eventually lowered to 25% sometime next year.
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