Indian Rupee Under Pressure Despite US Jobs Report – Central Bank Intervention Stabilizes

The Indian Rupee is near its historical low at the beginning of the week, after an unexpectedly strong U.S. jobs report has reduced the likelihood that the Federal Reserve will implement a significant rate cut at its next meeting. According to the 1-month forward contract, the rupee is expected to open against the US dollar at 83.97 to 83.98, which corresponds to the value of the previous session and is only slightly below the all-time low of September 5th. A currency trader at a bank emphasized that the rupee's behavior is likely to follow a known pattern. Although the dollar-rupee currency pair should actually open higher, the trader sees the Indian central bank as the main reason why this is not happening. It has been vigorously defending the 84 mark for two months. The Reserve Bank of India intervened both in the forward market and in the spot market to prevent the rupee from slipping below the 84 mark. These measures resemble the interventions that the central bank has conducted on previous occasions. The dollar rose on Friday after the U.S. jobs report showed the largest employment increase in six months, a declining unemployment rate, and rising wages. Analysts at MUFG Bank said the U.S. labor market is showing resilience. The robust labor market statistics have reduced the probability of a 50-basis-point rate cut by the Fed in November to 6%, compared to almost 50% just a week ago. The safe-haven dollar is additionally boosted by concerns over the Middle East conflict. The Brent oil price jumped 8.4% last week, which could worsen the trading conditions of many Asian economies and exert additional pressure on their currencies.