MUMBAI: The pressure on the Indian rupee is likely to persist on Friday, heading into the US jobs report that will likely decide whether the dollar remains on a bullish path.
The 1-month non-deliverable forward indicated that the rupee will open at 85.88-85.90 to the US dollar compared with 85.8475 in the previous session.
The local currency slipped to an all-time low of 85.9325 on Thursday but recovered due to likely intervention by the Reserve Bank of India and dollar offers by foreign banks.
Indian rupee weakens to record low
(I) “Would put down yesterday’s correction (in the ongoing uptrend in the dollar/rupee pair) to the market showing a bit of respect to the 86 level,” a currency trader at a bank said. However, the rupee “just will not be able to manage a good enough” recovery due to the strong dollar and elevated US Treasury yields. The dollar index, at 109.20, is not far away from the multi-month highs hit last week.
The 10-year yield is holding an over eight-month high, fuelled by expectations that President-elect Donald Trump’s policies will stoke inflation and boost growth.
The US nonfarm payrolls data, due after Indian markets close, will likely dictate what happens to the dollar and yields in the lead-up to Trump’s inauguration.
Nonfarm payrolls are expected to have risen by 160,000, according to a Reuters poll. If the unemployment rate remains unchanged at 4.2% and payrolls increase by more than 200,000, Treasury yields will likely rise and the dollar will “find good buyers”, said Chris Weston, head of research at Pepperstone, a Melbourne-based broker.
The jobs data comes in the backdrop of the Federal Reserve having indicated that it will proceed carefully on rate cuts this year.
American Dollar Exchange Rate