FX.co ★ Rupee Pauses Losses on Softer Dollar

The Indian rupee steadied around 95.2 per dollar, halting its recent decline as the US dollar weakened following softer-than-expected labor data. June payroll growth slowed markedly, and figures for the prior two months were revised down, leading traders to trim the implied probability of a Federal Reserve rate hike in September to about 53%, from 75% before the release. The resulting drop in the dollar supported most Asian currencies, offering some relief to the rupee.

Despite the improved tone, markets are still closely tracking merchant and portfolio flows after the rupee slipped to a three-week low in the previous session, weighed down by arbitrage-driven demand and dollar buying by importers. Earlier in the week, the currency had found support from Reserve Bank of India interventions in both the onshore spot market and the offshore non-deliverable forwards market. However, those measures were largely counterbalanced by sustained dollar demand from foreign banks and oil companies, alongside continued foreign investor outflows from Indian equities.