The Indian rupee faces fresh downward pressure at the start of Friday trading, with offshore derivatives pointing to an opening price of ₹85.46 – ₹85.50 per U.S. dollar, down from Thursday’s close of ₹85.31. Currency traders indicate the psychologically crucial ₹85.30 base for USD/INR appears stronger than ever before after a surprisingly robust U.S. jobs report on Friday pushed the dollar and Treasury yields strongly higher.
Why the Greenback Jumped Overnight
New U.S. non‑farm payroll figures indicated June hiring running ahead of expectations while the unemployment rate fell rather than increased. The figures compelled traders to temper hopes of a Federal Reserve rate reduction at this month’s policy meeting, taking the 10‑year Treasury yield to 4.35 % and pushing the Dollar Index to 97.01.
Richard Potts of Bondford FX Advisory refers to the print as a “rare gift for the greenback,” saying that the jobs beat re-establishes the United States’ rate edge over most major economies in the near term. A Mumbai-based trader adds that as long as yields remain higher, “the market will support anything below 85.30 on USD/INR.”
Immediate Impact on the Rupee
- Non-deliverable forwards (NDFs): The one-month NDF was around ₹85.58, reflecting a drop in the rupee of about 20 paise at the opening.
- Spot levels: During late New‑York trading the spot had touched as low as ₹85.50, its lowest level in a week, before settling near ₹85.33.
- Forward premiums: The one‑year implied yield fell five basis points to 2.02 % after the Reserve Bank of India took traders by surprise by not raising its target for withdrawal of liquidity under the 14‑day variable‑rate reverse repo, reducing demand for long‑dated dollars
Foreign Investors Turn Cautious
Up-to-date National Securities Depository Ltd. (NSDL) statistics reveal foreign investors selling US $87 million of Indian stocks and US $158 million of debt on 2 July, sustaining a two‑week run of outflows. Portfolio managers identify three short‑term concerns:
- Uptick in dollar environment following the payroll shock.
- Uncertainty over tariffs prior to Washington’s 9 July deadline for bilateral trade agreements, which might restore tariffs on Indian exports over the base 10 % level.
- Regulatory headlines such as SEBI’s decision to bar U.S. trading firm Jane Street from local markets, which rattled brokerage stocks on Thursday.
Oil and Other Macro Variables
On the rupee’s positive side, Brent crude softened to US $68.50 per barrel, providing India’s import bill some respite, while a minor retracement in the Dollar Index during Asian hours may limit USD/INR appreciation if sustained. Nevertheless, most believe global yield differentials will dictate the near‑term narrative.
“Until the Fed’s path becomes clearer, every uptick in U.S. yields translates into at least a two‑paise sell‑off in the rupee,”
— Head trader, state‑run Indian bank
Market Technicals
- Support: ₹85.30 (well‑defended since mid‑June)
- Resistance: ₹85.70, followed by the April high near ₹85.95
- Momentum: The 14‑day RSI for USD/INR has moved back above neutral 50, suggesting fresh upside bias.
Policy and Tariff Overhang
Currency desks are also monitoring the U.S. tariff imposition deadline. The U.S. Treasury Secretary Scott Bessent estimates that about 100 nations could be slapped with a default 10 % reciprocal tariff if they fail to wrap up trade talks by 9 July. DBS Research considers India’s rate to be trimmed to that base, avoiding President Trump’s previous threat of imposing a 26 % duty on Indian imports.
Domestically, RBI liquidity policy will be pivotal at home. The central bank caught market participants short this week by not cutting the amount of variable‑rate reverse repo standing despite a system surplus of ₹3.7 trillion. If surpluses continue, traders anticipate that the RBI will intervene, possibly pushing short‑term forward premiums down.
What Could Turn Sentiment Around?
- U.S. CPI (10 July): A more benign print might rekindle expectations of a rate reduction in September.
- India’s June inflation (12 July): A downside surprise would restrain RBI tightening concerns.
- Tariff announcements: Relief on duties could encourage dollar sales by exporters at levels forecast to exceed ₹85.50.
- RBI intervention: The authorities have supported the rupee around ₹85.70 previously with spot and swap sales.
Outlook
In the near term, the pair is expected to trade between ₹85.30 and ₹85.70 unless U.S. yields break convincingly higher or the RBI changes its liquidity stance. A continued break above ₹85.70 could expose April’s 2025 high around ₹86, while a close below ₹85.30 would need a wider dollar retreat—something that is unlikely unless coming U.S. data re-opens the window to a July Fed cut.
Bottom Line: The Indian Rupee starts the day on the back foot as unexpectedly robust U.S. jobs data underpins the dollar’s dominance and dries up risk appetite. While foreign funds cut exposure and tariff clouds accumulate, the currency’s future now depends on whether the Fed’s hawkish repricing holds—and how aggressively the RBI decides to smooth the ride.
