Indian Rupee Update: Weak US Jobs Data Supports Rupee

Advisory Bazaar Info Services

The Indian rupee is expected to open slightly stronger against the US dollar on Monday. After closing at ₹95.2075 per dollar on Friday, the rupee is expected to open around ₹95.14–₹95.16 per dollar.

Weak US Jobs Data Weighs on Dollar

The rupee is receiving support from weakness in the US dollar following disappointing US employment data.

US non-farm payrolls unexpectedly declined by 23,000 in July, compared with market expectations of an increase of around 80,000 jobs. The weaker employment data has reduced expectations for a hawkish Federal Reserve stance and put pressure on the dollar.

Fed Rate Expectations

Following the weak employment report, market expectations for a September Federal Reserve rate hike have eased. Futures are now pricing in around a 44% probability of a rate hike in September, down from approximately 55% before the employment data.

A softer US labour market and reduced expectations of higher US interest rates could provide further support to emerging-market currencies, including the Indian rupee.

RBI Intervention Supports Rupee

Regular intervention by the Reserve Bank of India (RBI) in the currency market has helped the rupee recover over the past two weeks. RBI intervention remains an important factor limiting excessive volatility and sharp depreciation in the USD/INR pair.

The central bank’s intervention around Friday’s market opening also indicated that the RBI is likely to remain watchful of excessive pressure on the rupee amid geopolitical uncertainty and fluctuations in crude oil prices.

Crude Oil Remains a Key Factor

Brent crude was trading around $84.50 per barrel. While uncertainty surrounding the Strait of Hormuz continues to create upside risks for oil prices, crude remains well below the recent high of around $100 per barrel.

For India, crude oil prices remain a critical factor for the rupee. A sustained rise in oil prices could increase India’s import bill and dollar demand, potentially putting renewed pressure on the rupee.

Strait of Hormuz Risk

Uncertainty over the reopening of the Strait of Hormuz remains one of the major external risks for the Indian rupee.

A prolonged disruption to the key shipping route could push global crude oil prices higher, increase India’s import costs and put additional pressure on the rupee.

USD/INR Outlook

The near-term direction of the rupee will largely depend on crude oil prices, RBI intervention, dollar selling by exporters and investors at current levels, and broader movements in the US dollar.

Market Outlook

Weak US employment data and a softer dollar are positive factors for the Indian rupee. However, crude oil prices, geopolitical developments and RBI intervention will remain key factors determining the next move in USD/INR.

Disclaimer: This report is for market information and educational purposes only and should not be considered investment advice or a recommendation to buy or sell any financial instrument.