The Indian rupee opened stronger on Friday, appreciating 19 paise against the US dollar, as global currency markets reacted to weaker-than-expected US employment data that softened expectations of an imminent interest rate hike by the US Federal Reserve.
The domestic currency began trading at 95.20 per dollar compared with its previous close of 95.39, reflecting a positive start driven by global dollar weakness and improved risk sentiment across emerging markets.
The trigger for the move was a set of US labour market figures released overnight, which showed a sharp slowdown in job creation in June.
Additionally, job numbers for the previous two months were revised downward, reinforcing signs of cooling economic momentum in the United States.
This development has led investors to reassess expectations for further monetary tightening by the Federal Reserve.
Following the data release, market participants significantly reduced bets on a September rate hike.
Implied probabilities for another Fed increase dropped to around 53%, compared with nearly 75% before the employment report, signalling a sharp shift in sentiment.
The weaker outlook for US interest rates weighed on the dollar index, which tracks the performance of the US currency against a basket of major global currencies.
The index fell 0.2% to 100.77 on Friday, extending a 0.5% decline from the previous session and heading toward its steepest weekly fall since early April.
A softer dollar typically benefits emerging market currencies like the rupee by encouraging foreign portfolio inflows and reducing capital outflow pressures.
Other Asian currencies also strengthened in the range of 0.1% to 0.4%, while regional equity markets saw gains. The MSCI Asian equities index rose over 1%, reflecting improved global investor risk appetite.
Despite the positive global cues, market participants remain cautious about the rupee’s near-term direction.
Traders are closely monitoring exporter inflows, foreign portfolio investment trends, and corporate dollar demand from importers, which had weighed on the currency in the previous session.
On Thursday, the rupee had fallen to a three-week low due to outflows linked to arbitrage trades and import-related payments.
Although foreign portfolio outflows from equities have eased and bond inflows remain steady, market participants say exporter activity at current levels will be key in determining the currency’s next move.
Analysts also cautioned that uncertainty over US inflation trends and broader economic conditions continues to keep global currency markets volatile.
