The Indian rupee is expected to open lower on Thursday, after a measure of the US labor market boosted expectations that the Federal Reserve will make a smaller interest rate increase next month, boosting the American dollar.
The conflict in the Middle East and the potential impact it could have on oil prices is also expected to weigh on the Indian currency.
The one-month non-deliverable futures contract indicates that the rupee will open at 83.92-83.94 to the US dollar, up from 83.82 on Tuesday. Indian financial markets were closed on Wednesday due to a public holiday. The rupee is not far from its all-time low of 83.9850 reached a month ago.
The rupee is “now back towards the high end of the current range, tracking the evolving chances of a Fed rate cut,” said Srinivas Puni, managing director at QuantArt Market Solutions.
Unless Friday’s US jobs numbers are much stronger than expected, the 84-84.10 area will likely remain the top for USD/INR, he said.
The dollar index was up for the fourth straight session and at its highest level in three weeks, on growing expectations that the Fed at its November meeting will cut rates by 25 basis points, a step less than the 50 basis points it opted for last month.
The dollar was helped by data on Wednesday that showed U.S. private payrolls rose more than expected last month, boosting expectations of a robust reading in monthly nonfarm payrolls figures due on Friday.
The data supported recent remarks by Fed Chairman Jerome Powell that the U.S. central bank is in no rush to cut rates.
Futures now forecast just a one-in-three chance of a 50 basis point rate cut next month, down from nearly 60% a week ago.
Meanwhile, oil prices rose on Thursday amid concerns about the worsening conflict in the Middle East.
KEY INDICATORS:
** One-month non-deliverable rupee forward exchange rate at 84.04; One-month forward premium in the domestic market at 11 paise.
** Dollar index up to 101.75
** Brent up 0.9% to $74.6 per barrel
** Ten-year US bond yield at 3.79%.
** According to NSDL data, foreign investors sold $767 million worth of Indian stocks as of September 30.
**NSDL data shows foreign investors bought $17.6 million worth of Indian bonds on September 30.
