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The Indian rupee is under pressure thanks to a robust US dollar and high Treasury yields, with a key US jobs report on the horizon that could heighten this tension.
What does this mean?
The rupee opened weaker at 85.88-85.90 after reaching a record low of 85.9325, prompting potential intervention from the Reserve Bank of India. Dollar offers from foreign banks indicate market caution about crossing the 86 threshold. Meanwhile, the dollar remains strong, with its index near a multi-month high of 109.20 and 10-year US Treasury yields at an eight-month peak, driven by expectations of US policy-induced growth and inflation. The upcoming US nonfarm payrolls report, forecasting 160,000 jobs but possibly exceeding 200,000, could further boost yields and the dollar, maintaining pressure on the rupee.
Markets are eyeing the US nonfarm payrolls closely as a stronger-than-expected report could hike Treasury yields and the dollar, impacting global currencies like the rupee. The key is the anticipated job growth potentially topping 200,000, which would likely attract more dollar investors.
The bigger picture: Economic tides and their global wake.
Global markets are interconnected, meaning the US jobs report impacts more than just domestic policy. With recent foreign investor sell-offs of $434.4 million in Indian shares, the rupee's battle against a strong dollar might lead to shifts in trading strategies across emerging markets.