Indian rupee slips as markets await key economic data

The Indian rupee weakened marginally on Monday, while forward premiums declined, as market participants awaited key US economic data that could provide clues on the pace of the Federal Reserve’s upcoming rate cuts.

The rupee stood at 83.8775 against the dollar at 10:29 am IST, down slightly from its previous close of 83.8625.

Other Asian currencies also weakened, falling between 0.2 per cent and 0.5 per cent, while the dollar index remained relatively unchanged at 101.74.

Traders are closely watching a series of US economic data releases this week, including the ISM manufacturing and services indexes, JOLTS job openings, ADP private payrolls, and weekly jobless claims. The most highly anticipated release is the non-farm payrolls report, due on Friday.

Fed Chair Jerome Powell’s recent comments at Jackson Hole about the US labour market have heightened the significance of this week’s jobs report.

The data could be pivotal in determining whether the Fed opts for a 25 or 50 basis points rate cut, according to a note from HSBC Bank, which described this as a “make-or-break week” for the dollar.

Currently, market participants are pricing in a 30 per cent probability of a 50-basis points rate cut and a 70 per cent chance of a 25 basis points cut.

Meanwhile, dollar/rupee forward premiums retreated slightly, with the 1-year implied yield down by 1 basis point. Forward premiums have been trending upward over the past one-and-a-half months amid expectations of a Fed rate cut.

Attribution: Reuters

Subediting: M. S. Salama