The Indian rupee tumbled to an all-time low, breaching the 86 mark against the US dollar on Monday, driven by stronger-than-expected US jobs data, raising concerns about potential delays in interest rate cuts by the Federal Reserve.
Opening at 86.2050, weaker than Friday’s close of 85.9650, the rupee reflected mounting market pressures.
The slide comes in the wake of the US Labour Department’s report that employers added 256,000 jobs last month, far exceeding economists’ forecast of 160,000 in a Reuters poll.
Additionally, the unemployment rate dropped to 4.1%, signalling resilience in the US labour market.
A currency trader, remarked, “For speculators already betting on a weaker rupee, these job numbers provide yet another reason to maintain their positions. However, we might be nearing levels where many negative factors affecting the rupee have already been priced in. A decent correction in the rupee’s value could be overdue.”
The robust US employment figures have reinforced the Federal Reserve’s focus on controlling inflation, reducing expectations of significant interest rate cuts in 2025.
Market projections now anticipate only one potential rate reduction this year, contrasting with the three cuts implemented by the Fed between September and December of the previous year.
Morgan Stanley noted that the strong job numbers alleviate concerns about weaknesses in the labour market and shift the Federal Reserve’s priorities back to inflation control.
The implications for emerging markets like India are significant, with the rupee’s depreciation potentially leading to increased import costs and heightened inflationary pressures, complicating the nation’s economic recovery.
The rupee’s performance underscores the challenges emerging markets face amid global monetary tightening. With Federal Reserve policies under scrutiny, currency market volatility is expected to persist in the near term.
Follow us
