MUMBAI: The Indian rupee is expected to recover on Monday on the back of a pullback in US yields and the decline in the dollar after the US economy added fewer jobs than was forecast.
Non-deliverable forwards indicate rupee will open at around 82.70 to the US dollar, compared with 82.84 in the previous session.
The dollar index retreated 0.4% on Friday.
Asian currencies began the week on a higher note.
There will be relief for the rupee at the open “to an extent,” with dollar broadly lower, a foreign exchange trader said.
“This means there is no threat to the 83 handle being taken out today. We now move on to the US inflation data and the RBI (Reserve Bank of India).”
The 10-year US yields dropped 12 basis points on Friday after U.S July nonfarm payrolls increased slightly weaker than economists’ expectations, and job additions for the previous two months were revised lower.
Indian rupee likely to remain under pressure on rising US yields
The 2-year US yield declined while the already low odds of Federal Reserve rate hike in September dropped further.
However, Friday’s report did have points which could sow doubts on whether the Fed will be on hold from now on.
The unemployment rate dropped and wage growth surprised on the upside, suggesting that the US labour market remained resilient.
“A mixed outcome, which doesn’t rule out further rate hikes from the Federal Reserve, but doesn’t give the central bank the all clear on inflation risks either,” ING Bank said in a note.
Meanwhile, US consumer inflation data and the RBI policy decision are due Thursday.
An in-line or a softer-than-expected reading will reinforce expectations of a Fed pause.
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