Rupee may meander below 88/USD, US labour data in focus
The Indian rupee is expected to open steady on Friday, supported by modest gains in regional peers heading into the closely watched U.S. non-farm payrolls report that could cement expectations of policy easing by the U.S. Federal Reserve.
The 1-month non-deliverable forward indicated the rupee will open in the 88.10-88.14 range versus the U.S. dollar, compared with 88.1450 in the previous session.
"USD/INR may try to move below 88 but that is expected to be short-lived due to the strong client interest in buying on dips," an FX salesperson at a large foreign bank said.
Data released on Thursday kept expectations of a Fed rate cut intact with the number of Americans filing new applications for jobless benefits rising more than expected last week, consistent with softening of labour market conditions.
New York Fed President John Williams said that a gradual lowering in short-term borrowing costs is likely to happen over time if the economy meets his current forecast of modest increases in unemployment and a softening of inflation trends next year.
Despite burgeoning expectations of a rate cut in the U.S., the rupee has lingered on the weak side of 88 as worries over the impact of steep U.S. tariffs prompted importers to step up hedging while equity inflows remain lacklustre, traders said.
The rupee is on course to end the week little changed after dipping to a record low of 88.33 on September 1.
Traders reckon that while there will be a modest reaction to a soft U.S. non-farm payrolls report, due post Indian market hours, an upside surprise would have a larger bearing on the local currency when the market re-opens after a local holiday on Monday.
Analysts at Goldman Sachs expect a below-consensus addition of 60,000 in U.S. non-farm payrolls for August and a marginal rise in the unemployment rate to 4.3%.
The dollar was a touch lower against a basket of peers at 98.1 and slipped 0.2% against the Japanese yen following the announcement of lower tariffs on Japanese automobile imports.
KEY INDICATORS:
** One-month non-deliverable rupee forward at 88.26; onshore one-month forward premium at 11.50 paisa
** Dollar index down 0.1% at 98.1
** Brent crude futures down 0.4% at $66.8 per barrel
** Ten-year U.S. Treasury yield at 4.16%
** As per NSDL data, foreign investors sold a net $77.7mln worth of Indian shares on Sep. 3
** NSDL data shows foreign investors sold a net $16.4mln worth of Indian bonds on Sep. 3
