Indian rupee eyes reprieve as lukewarm jobs report pushes back Fed hike wagers

MUMBAI: The Indian rupee is expected to open stronger on Friday and may snap a four-day losing streak, helped by ​a broadly weaker dollar after a tepid US jobs report pushed back market ‌expectations for imminent rate hikes by the Federal Reserve.

The currency is expected to open in the 95.12-95.16 range, per traders, having settled at 95.3925 on Thursday.

The dollar index , which ​measures the greenback against a basket of currencies, was 0.2% ​lower at 100.77 after a 0.5% decline on Thursday. It is ⁠on course for its biggest weekly drop since early April.

Data on ​Thursday showed that U.S. job growth slowed sharply in June and payroll gains for the ​prior two months were revised lower, pointing to a cooling labour market.

This prompted traders in the interest rate futures market to lower the odds of a Fed rate hike in ​September to about 53% from roughly 75% before the employment report.

“The overall ​implications for the Fed seems to be one where the payrolls report lowers the ‌chance ⁠of a rate hike in the near-term, but has not ultimately clarified the health of the labour market and more importantly the path ahead for inflation,” MUFG said in a note.

Most Asian currencies were up between 0.1% and 0.4% ​on Friday, while regional ​stocks also rose, with MSCI’s ⁠gauge of Asian shares up over 1%.

While a broadly weaker dollar should offer comfort to the rupee, traders will ​keep an eye on how merchant and portfolio flows ​shape up.

The ⁠currency had declined to a three-week low in the previous session, weighed down by market flows related to arbitrage trades and merchant payments.Foreign portfolio outflows from Indian ⁠equities ​have eased while bonds have seen inflows, so ​the next factor to watch will be the levels that exporters choose to enter the market again, an FX ​salesperson at a foreign bank said.