The Indian rupee is likely to start Friday on a weaker note as a sharp rise in crude oil prices puts pressure on the currency and raises concerns about inflation and the US Federal Reserve’s interest rate outlook.
The rupee is expected to open around 95.35–95.40 against the dollar, compared with Thursday’s close of 95.22. Market participants are also watching the July US jobs report, due later in the day, for signals about the labour market and the Fed’s next policy decision.
Brent crude rose about 4% on Thursday and gained another 1% in Asian trading, moving close to $84 a barrel. The rise came amid renewed concerns about access to the Strait of Hormuz.
Iran, working with Oman, has proposed banning vessels considered hostile from the strait and imposing heavy fines on those that violate the proposed rules.
Oil prices have played a major role in shaping the rupee’s direction and market sentiment in recent months. The Reserve Bank of India’s policy measures and direct market intervention have also influenced the currency’s movement.
The rupee had recently moved beyond the 95-per-dollar level after Brent crude fell below $80 a barrel and the RBI sold dollars. With oil-related risks returning, traders expect the rupee’s next move to depend partly on the extent of RBI support.
“You will see a push higher (in dollar/rupee) today through the day. It’s not just about oil. There is underlying demand (for dollars) at these levels,” a currency trader at a bank said.
US jobs data, Fed outlook in focus
US nonfarm payrolls are expected to increase by 80,000 in July, following a rise of 57,000 in June, according to a survey of economists. The unemployment rate is forecast to remain unchanged at 4.2%.
The jobs data comes as markets assess whether the Federal Reserve could raise interest rates amid inflation concerns linked to higher oil prices.
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