MUMBAI, July 3(Reuters) – 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 U.S. 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.
Reporting by Jaspreet Kalra; Editing by Sonia Cheema.
