September Fed rate cut bets undermine dollar, handing Indian rupee a breather

MUMBAI: The Indian rupee is set to open slightly higher on Thursday, aided by a decline in the US dollar after weaker-than-expected private payrolls and services data spurred concerns over the US economic outlook and fuelled hopes of a dovish Federal Reserve stance.

The 1-month non-deliverable forward indicated a open in the 85.82-85.84 range, versus 85.90 in the previous session.

The Indian currency has logged daily losses in six of the past seven sessions, and on Wednesday it slipped past the 86 level.

“The rupee should find relief from its downtrend,” a currency trader at a Mumbai-based bank said. Whether that opening move has any follow through or holds is doubtful, he said.

The 85.70–85.75 zone will now act a support for the dollar/rupee pair, while resistance is in the 86.00–86.10 region, he added.

The current bias, he noted, favours a break past 86.00–86.10 rather than a sustained move dip below 85.70–85.75.

The dollar dropped against its major peers on Wednesday and the currency was down versus Asian currencies on Thursday after two disappointing sets of data raised the odds of the Fed cutting rates at the September meeting.

The probability of Fed rate reduction this month remains low.

Indian rupee falters as bullish exits, dollar strength collide

The private survey showed the increase in US private payrolls was well short of estimates.

The Institute for Supply Management (ISM) report on the US services sector unexpectedly showed a contraction.

The ISM’s measure of prices paid for services inputs rose to 68.7, the highest level since November 2022, from 65.1 in April.

Concerns around the US economic outlook mounted after the data, pushing US yields and the dollar lower, Morgan Stanley said in its daily commentary.

Private payroll has been slowing since the fourth quarter of 2024, signalling softening in the labour market and the ISM services data signals stagflation concerns, it added.