Indian rupee recovery hangs in balance on return of oil risks before US jobs data

MUMBAI: The Indian rupee is expected to open lower on Friday, with a jump in crude oil prices weighing on the currency ​while fuelling expectations that the US Federal Reserve could hike rates.

The ‌July US jobs report, due later in the day, will be closely scrutinized for clues on the health of the labor market and the Fed’s next policy move.

The Indian rupee ​is expected to open in the 95.35-95.40 range, per traders, having ​settled at 95.22 to the dollar on Thursday.

Brent crude climbed about ⁠4% on Thursday and added another 1% in Asian trading, rising to ​near $84 a barrel amid renewed concerns over access to the Strait of Hormuz.

Iran, ​working with Oman, proposed banning vessels deemed hostile from the strait and imposing heavy fines on those violating the proposed rules.

The direction and sentiment on the rupee have been shaped ​by oil prices for months. Also, the Reserve Bank of India’s policy ​actions and direct market intervention have played a key role in determining the currency’s trajectory.

The ‌rupee ⁠had managed to move past the 95-per-dollar mark, helped by Brent crude slipping below $80 a barrel and RBI dollar sales. With oil-related risks back in focus, traders said the currency’s direction will again depend on the extent of ​RBI support.

“You will see ​a push ⁠higher (in dollar/rupee) today through the day. It’s not just about oil. There is underlying demand (for dollars) at these levels,” a ​currency trader at a bank said.

US jobs data, FED

US ​nonfarm payrolls ⁠are forecast to have risen by 80,000 last month after an increase of 57,000 in June, according to a Reuters survey of economists.

The unemployment rate is ⁠expected ​to hold steady at 4.2%.

The data comes against ​a backdrop of heightened uncertainty over whether the Federal Reserve will raise interest rates amid inflation ​risks fuelled by higher oil prices.