Rupee Pauses Losses on Softer Dollar

The Indian rupee hovered around 95.2 per dollar, pausing recent losses as the greenback softened on softer-than-expected labor data. June payroll growth slowed sharply while gains for the previous two months were revised lower, prompting traders to reduce the probability of a September Federal Reserve rate hike to around 53%, down from 75% before the report. The weaker dollar lifted most Asian currencies, providing support for the rupee. Despite the improved sentiment, investors continue to monitor merchant and portfolio flows after the rupee fell to a three-week low in the previous session, pressured by arbitrage-related demand and importer dollar purchases. Earlier this week, the currency was supported by interventions from the RBI in both the onshore spot and offshore non-deliverable forwards markets. However, those efforts were largely offset by persistent dollar demand from foreign banks and oil companies, as well as continued foreign investor outflows from Indian equities.

The Indian rupee strengthened to around 94.9 per dollar, retreating from three-week lows as another decline in crude oil prices supported sentiment. Brent crude extended its losses after falling 1% on Wednesday and slipping another 1%, dropping below USD 71 per barrel following signs of progress in indirect US-Iran negotiations and easing concerns over disruptions to oil supplies through the Strait of Hormuz. Although lower energy prices offered temporary relief by easing concerns over India's import bill, traders remained cautious, citing higher US Treasury yields and a stronger dollar that kept most Asian currencies under pressure. Earlier this week, the Reserve Bank of India was reportedly seen selling US dollars near the 94.75 level, but the currency continued to weaken after the intervention eased. Investors also assessed recent US economic data and remarks from Federal Reserve officials, reinforcing the importance of containing inflation, supporting demand for the US dollar.

The Indian rupee hovered around 94.7 per dollar, extending its recent losses as rising US Treasury yields strengthened the greenback and weighed on Asian currencies. Higher bond yields dampened demand for emerging-market assets, while renewed dollar buying and weaker regional currencies kept pressure on the rupee. Market sentiment remained cautious after stronger-than-expected US labor market data reinforced expectations that the Federal Reserve could keep interest rates higher for longer. Investors are now awaiting additional US employment data for further clues on the Fed's policy outlook. Meanwhile, higher oil prices added another headwind for the currency, as firmer crude prices typically increase India's import bill and demand for dollars. Oil gained support after a Qatari official said US envoys in Doha would not hold high-level talks with Iran, casting doubt on near-term diplomatic progress and reducing expectations of a potential increase in Iranian oil supplies.