USD/INR loses traction below 83.20 following RBI rate decision, US NFP eyed

USD/INR loses momentum around 83.16 during the Asian trading hours on Friday. Markets turn cautious following the Reserve Bank of India (RBI) monetary policy meeting. Traders await the highly-anticipated US Nonfarm Payrolls data on Friday for the fresh impetus. The figures are expected to rise by 170K and this event could trigger the volatility in the market.

Following its October monetary policy meeting, the Reserve Bank of India (RBI) board members decided to hold the interest rate unchanged at 6.5%, as widely expected. The benchmark repo rate was raised in February and remained unchanged since then due to the higher retail inflation and global factors, particularly high crude oil prices.

During the monetary policy meeting, RBI Chief Shaktikanta Das stated that headline inflation would continue to fall in September while mentioning that cumulative policy rate hikes still working through the economy.

About the data this week, S&P Global India Services PMI for September improved to 61.0 from 60.1 in the previous reading, better than the expectation of 59.5. Meanwhile, the Manufacturing PMI came in at 57.5 in September from 58.6 in August, missing the estimation of 58.1.

On the other hand, US data on Thursday revealed that the weekly Initial Jobless Claims for the week ending on September 30 improved to 207,000 from 205,000 in the previous week, below the market consensus of 210,000. Additionally, the US Balance of Trade deficit was $58.3B from the $64.7B recorded in July, lower than the expected $ 62.3 B.

Earlier this week, US private payrolls for September rose by 89,000 versus 180,000 prior, below the estimation, While, the US ISM Services PMI fell to 53.6 in September from the previous reading of 54.5, matching the market estimation.

Federal Reserve (Fed) is not expected to abandon its ‘higher-for-longer’ stance on interest rates. Market players await the highly-anticipated US Nonfarm Payrolls for more clarity about labor market conditions. The softer figures could exert some selling pressure on the Greenback against its rivals and act as a headwind for the USD/INR pair.

Looking ahead, market players will keep an eye on the US employment data due later in the American session on Friday. The US Nonfarm Payrolls are expected to rise by 170K while the Unemployment Rate is estimated to decline to 3.7% from 3.8%. Traders will take cues from these figures and find trading opportunities around the USD/INR pair.