MUMBAI: The Indian rupee is likely to take cues this week from moves in the US dollar index while keeping an eye on key US labour-market data, and bond yields are expected to trend lower going into 2024.
The rupee ended slightly lower at 83.2075 against the US dollar last Friday, pressured by US-dollar demand from importers and a slight recovery in the US dollar index.
Investors are currently pricing-in an 85% chance of a US rate cut in March, per the CME Group’s FedWatch tool.
The domestic unit ended 2023 down about 0.5% year-on-year and logged its sixth straight annual decline. Through last week, the rupee remained in a range between 83.10 and 83.35.
“Our view is that rupee should appreciate from here amid broadly supportive global cues,” said Abhilash Koikkara, head of foreign exchange and rates at Nuvama Professional Clients Group.
If the labour market data reinforces the view of potential cooling in the US economy, the US dollar index may decline further, aiding the rupee, Koikkara added.
Other key US data scheduled for release this week include initial jobless claims on Thursday, followed by the closely watched non-farm payrolls and unemployment print on Friday.
Non-farm payrolls likely fell to 158,000, down from 199,000 in November, according to a Reuters poll.
A pickup in foreign inflows into Indian markets has also offered some support to the rupee, but the domestic unit has been unable to gain much as the central bank likely intervened in last few weeks to absorb the inflows, according to traders.
Of the total US$28.7bil of inflows into Indian equities and bonds in 2023, about US$10.1bil came in December alone, according to NSDL data. — Reuters
