Indian rupee seen lower after dollar surge; U.S. jobs data eyed

·2-min read
A customer hands Indian currency notes to an attendant at a fuel station in Mumbai

By Nimesh Vora

MUMBAI (Reuters) - The Indian rupee is expected to open lower against the U.S. currency on Friday, after the dollar index climbed to its highest level in 20 years, ahead of the critical U.S. jobs report.

The rupee is tipped at around 79.68-79.70 per U.S. dollar in initial trades, down from 79.5550 in the previous session. The rupee on Thursday witnessed a choppy session, trading in a 79.30 to 79.66 range.

The market is "a bit indecisive" on what to do after rupee managed a "decent enough recovery" from record lows, a trader at a Mumbai-based bank said. The bias on the USD/INR pair is now "more neutral" rather than "a buy-on-dips," the trader said.

"With the bias neutral, today's U.S. jobs data and India's trade deficit numbers will be key."

The dollar index on Thursday climbed to just shy of the psychologically important 110 level. An unexpected decline in U.S. jobless claims alongside slightly better-than-expected U.S. ISM manufacturing supported demand for the dollar.

The data is expected to further reaffirm room for the Federal Reserve to opt for larger rate increases.

Treasury yields rose Thursday, with the 2-year reaching a new 15-year high.

Non-farm payrolls data is due at 1230 GMT and economists expect 300,000 jobs were added in August, which would extend a strong run of data. The report assumes significance in light of Fed's remarks that the pace of rate hikes is data dependant.

Higher-than-expected job additions will further increase odds of the Fed hiking rates by 75 basis points at this month's meeting.

Asian shares and currencies were moderately lower on Friday.

Meanwhile, India's trade deficit numbers will likely be released later in the day. According to calculations by Reuters, based on information from a government source, India's trade deficit in August moderated to $28.68 billion from $30 billion in the previous month.

KEY INDICATORS: ** One-month non-deliverable rupee forward at 79.91; onshore one-month forward premium at 20 paise ** USD/INR NSE September futures closed on Thursday at 79.7725 ** USD/INR forward premium as of Sep. 1 for end current month is 16.0 paise ** Dollar index at 109.55 ** Brent crude futures up 1.2% at $93.4 per barrel ** Ten-year U.S. note yield at 3.26%, India 10-yr bond yield at 7.21% ** SGX Nifty nearest-month futures up 0.1% at 17,586 ** As per NSDL data, foreign investors bought a net $534.3mln worth of Indian shares on Aug 30

** NSDL data shows foreign investors sold a net $1.1mln worth of Indian bonds on Aug 30

(Reporting by Nimesh Vora; Editing by Neha Arora)