MUMBAI: The Indian rupee is likely to open weaker on Monday, tracking the decline in Asian equities and currencies fuelled by US slowdown worries.
The 1-month non-deliverable forward indicated that the rupee will open at 83.97-83.98 to the US dollar compared with 83.9475 in the previous session.
The rupee for a large part of last week remained near the 84 mark, hitting an all-time low of 83.9850 on Thursday.
The Reserve Bank of India likely intervened on multiple occasions last week to support the rupee.
“Will the RBI allow 84? Will the break of it lead to a large move and a pick up in volatility?” a currency trader at a bank said. “Impossible to know what the RBI will do. If they do allow 84, I doubt it leads to a big breakout.”
Asian equities and currencies declined following Friday’s selloff in US equities on concerns over the US growth outlook. Investors digested the US jobs report, which did not provide the much-wanted clarity on the size of the rate cut the Federal Reserve will opt for at next week’s meeting.
The US economy added fewer jobs than expected in August, leading to worries over the slowing labour market and what that means for the economy.
However, there was a slight improvement in the unemployment rate.
Indian rupee gains on broad dollar decline
Following the report, the odds of a 50-basis-point rate cut are at 1-in-3 and those for a 25-bp cut are at 2-in-3, almost unchanged from prior to the jobs data.
Comments by Fed speakers on Friday indicated that policymakers had little appetite for a 50-bp cut, ANZ Bank said in a note. On balance, the US employment data “didn’t provide conclusive evidence of a deterioration in labour market conditions” and reduce the likelihood of the Fed starting the easing cycle in “a forceful manner”, it said.
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