USD/INR: Rupee weakens to 10-week low amid broad risk aversion

Key points

India’s Rupee extended losses against the US Dollar on Thursday, while hitting a fresh 10-week low, amid a broad risk aversion stemming from the US credit rating downgrade by ratings agency Fitch.

The move surprised markets and raised some fiscal outlook concerns, while triggering safe haven asset purchases and supporting the US Dollar.

The US Dollar Index scaled a fresh four-week peak of 102.84 and was last up 0.16% on the day to 102.765.

The greenback’s strength was also fueled by the latest macro data out of the US, which showed private payrolls had increased at a faster pace than expected in July, suggesting labor market resilience.

“Data out of the U.S. continues to be stronger than expectations. The employment situation is still very good,” Niels Christensen, chief analyst at Nordea, was quoted as saying by Reuters.

“Rate differentials continue to move in favor of the dollar,” Christensen said.

Investors will now be paying attention to the US Non-Farm Payrolls report due out on Friday. Employers in all sectors of the US economy, excluding farming industry, probably added 200,000 job positions in July, according to market consensus, following a job growth of 209,000 in June.

Meanwhile, the Reserve Bank of India is expected to take action to prevent further depreciation of the Rupee.

According to a Reuters report, citing unnamed foreign exchange traders, India’s central bank has likely sold dollars through some state-run banks at levels around 82.75-82.80 Rupees.

As of 9:21 GMT on Thursday USD/INR was inching up 0.03% to trade at 82.7300. Earlier in the session, the exotic Forex pair went up as high as 82.8075. The latter has been the pair’s strongest level since May 24th (82.8610).