USD/INR trades firmly even as US Dollar slumps ahead of US NFP data
- The Indian Rupee falls to near 88.35 against the US Dollar.
- Investors brace for significant action in the USD/INR after the US NFP data release.
- India’s Commerce Minister Goyal is confident about strengthening the Indian Rupee.
The Indian Rupee (INR) trades lower to near 88.35 against the US Dollar (USD) on Friday. The USD/INR pair advances even as the US Dollar (USD) declines ahead of the United States (US) Nonfarm Payrolls (NFP) data for August, which will be published at 12:30 GMT.
At the press time, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, slumps to near 98.15.
Investors will closely monitor the US official employment data to get fresh cues about the Federal Reserve’s (Fed) monetary policy outlook for the remainder of the year. According to the CME FedWatch tool, traders have fully priced in a 25 basis points (bps) interest rate cut by the Fed for the September policy meeting. Fed dovish expectations intensified after the NFP report for July showed a significant downward revision in May and June’s payroll data.
The NFP report for August is expected to show that US employers hired 75K fresh workers, almost in line with the prior reading of 73K. The Unemployment Rate is seen accelerating to 4.3% from the previous release of 4.2%. Meanwhile, Average Hourly Earnings, a key measure of wage growth, is expected to have grown at an annual pace of 3.7%, slower than 3.9% in July. On a monthly basis, the wage growth measure grew steadily by 0.3%.
On Thursday, the US ADP Employment Change data showed signs of slowdown in the labor demand. The private sector hired 54K fresh workers, missed estimates of 65K, and the prior reading of 106K.
Going forward, investors will also focus on the US Supreme Court verdict on tariffs imposed by President Donald Trump since his return to the White House. Lately, US appeals court called majority of additional duties as “illegal” and accused Trump for wrongfully invoking the emergency law.
US Dollar Price Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the weakest against the Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | INR | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.31% | -0.35% | -0.13% | -0.17% | -0.49% | 0.07% | -0.33% | |
| EUR | 0.31% | -0.02% | 0.12% | 0.15% | -0.08% | 0.42% | -0.01% | |
| GBP | 0.35% | 0.02% | 0.14% | 0.17% | -0.05% | 0.43% | 0.05% | |
| JPY | 0.13% | -0.12% | -0.14% | 0.02% | -0.29% | 0.25% | -0.03% | |
| CAD | 0.17% | -0.15% | -0.17% | -0.02% | -0.27% | 0.20% | -0.13% | |
| AUD | 0.49% | 0.08% | 0.05% | 0.29% | 0.27% | 0.57% | 0.11% | |
| INR | -0.07% | -0.42% | -0.43% | -0.25% | -0.20% | -0.57% | -0.45% | |
| CHF | 0.33% | 0.00% | -0.05% | 0.03% | 0.13% | -0.11% | 0.45% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
Daily digest market movers: Investors expect the Fed to cut interest rates this month
- The USD/INR pair rises to near 88.35 on Friday. A significant underperformance by the Indian Rupee has strengthened the pair. The Indian currency faces selling pressure amid trade tensions between the US and India. In August, Washington raised tariffs on imports from India to 50% (partially for purchasing Russian Oil, and for failing to make a trade agreement).
- The imposition of almost the highest tariffs by the US in comparison with its other key trading partners has diminished the competitiveness of Indian products in the global market.
- In response to the Indian Rupee trading near its all-time low against the US Dollar, India’s Union Commerce and Industry Minister Piyush Goyal has assured, in an interview with Network18 on Thursday, that the government is “monitoring the situation and we [administration] are very confident that things will go back to normal in the near future," Moneycontrol reported.
- India’s Commerce Minister Goyal also hailed the rationalization of the Goods and Services Tax (GST) structure, citing that the increase in consumption from GST reforms will offset the revenue loss from tax revision. On Wednesday, India’s Finance Minister Nirmala Sitharaman abolished four-tier GST framework, and announced that there will be only two tax slabs: 5% and 18%.
- On the front of foreign fund flow into Indian stock markets, a slowdown in selling by Foreign Institutional Investors (FIIs) has been observed. On Thursday, FIIs pared stake worth Rs. 106.34 crores from the Indian equity market. The pace of FIIs selling appears to be moderate in comparison with the sell-off seen in July and August.
Technical Analysis: USD/INR gains to near 88.30
USD/INR rises to near 88.30 at open on Friday. The near-term trend of the pair remains bullish as it holds above the 20-day Exponential Moving Average (EMA), which trades near 87.73.
The 14-day Relative Strength Index (RSI) trades calmly above 60.00, suggesting that a fresh bullish momentum has come into effect.
Looking down, the 20-day will act as key support for the major. On the upside, the pair has entered an uncharted territory. The round figure of 89.00 would be the key hurdle for the pair.
Nonfarm Payrolls FAQs
Nonfarm Payrolls (NFP) are part of the US Bureau of Labor Statistics monthly jobs report. The Nonfarm Payrolls component specifically measures the change in the number of people employed in the US during the previous month, excluding the farming industry.
The Nonfarm Payrolls figure can influence the decisions of the Federal Reserve by providing a measure of how successfully the Fed is meeting its mandate of fostering full employment and 2% inflation. A relatively high NFP figure means more people are in employment, earning more money and therefore probably spending more. A relatively low Nonfarm Payrolls’ result, on the either hand, could mean people are struggling to find work. The Fed will typically raise interest rates to combat high inflation triggered by low unemployment, and lower them to stimulate a stagnant labor market.
Nonfarm Payrolls generally have a positive correlation with the US Dollar. This means when payrolls’ figures come out higher-than-expected the USD tends to rally and vice versa when they are lower. NFPs influence the US Dollar by virtue of their impact on inflation, monetary policy expectations and interest rates. A higher NFP usually means the Federal Reserve will be more tight in its monetary policy, supporting the USD.
Nonfarm Payrolls are generally negatively-correlated with the price of Gold. This means a higher-than-expected payrolls’ figure will have a depressing effect on the Gold price and vice versa. Higher NFP generally has a positive effect on the value of the USD, and like most major commodities Gold is priced in US Dollars. If the USD gains in value, therefore, it requires less Dollars to buy an ounce of Gold. Also, higher interest rates (typically helped higher NFPs) also lessen the attractiveness of Gold as an investment compared to staying in cash, where the money will at least earn interest.
Nonfarm Payrolls is only one component within a bigger jobs report and it can be overshadowed by the other components. At times, when NFP come out higher-than-forecast, but the Average Weekly Earnings is lower than expected, the market has ignored the potentially inflationary effect of the headline result and interpreted the fall in earnings as deflationary. The Participation Rate and the Average Weekly Hours components can also influence the market reaction, but only in seldom events like the “Great Resignation” or the Global Financial Crisis.
Author
Sagar Dua
FXStreet
Sagar Dua is associated with the financial markets from his college days. Along with pursuing post-graduation in Commerce in 2014, he started his markets training with chart analysis.
