Indian rupee to climb at open after tepid US jobs locks in Fed rate cut

MUMBAI: The Indian rupee is expected to open higher on Tuesday, supported by a lower U.S. dollar and Treasury yields after weak jobs data made it certain that the Federal Reserve will cut rates next week.

The 1-month non-deliverable forward indicated the rupee will open in the 87.96–88.00 range against the dollar, up from 88.2650 on Friday when it touched a record low of 88.36. Indian FX and money markets were shut on Monday.

The rupee has “managed a breather” on the back of the U.S. jobs data, a currency trader at a bank said. The 87.90–87.95 zone is a key resistance, he added, noting that unless it is broken decisively, “nothing much will change”.

The currency will be catching up with the strength in Asian peers, which extended into Tuesday, after data showed that job growth slowing significantly and unemployment climbed to a near four-year high, indicating cooling labour market conditions and sealing the chances for a Fed cut.

Investors have fully priced in a 25-basis-point rate cut at the Federal Reserve’s September 16-17 meeting, with a outside chance of a larger 50-basis-point move.

They are pricing in a high probability of cuts at the October and December meetings.

Weighed down by rate cut bets, the dollar index has fallen to a six-week low, while the 2-year U.S. Treasury yield has slipped to its lowest since the first week of April. The deteriorating U.S. jobs market will “smooth the dollar decline”, ING Bank said in a note.

The dollar index fell to 97.344 in Asia trading before the release of preliminary benchmark revisions for jobs data spanning from April 2024 to March 2025.

Economists anticipate a downward revision of up to 800,000 jobs, which could signal that the Fed is behind the curve in efforts to achieve maximum employment.