• Indian Rupee (INR) pares losses from previous session
  • Domestic equities hit fresh all time high
  • US Dollar (USD) slips post NFP
  • December saw -140k job losses vs 71k gains expected

The US Dollar Indian Rupee (USD/INR) exchange rate is slipping lower on Friday, paring gains from the previous session. The pair settled +0.4% on Thursday at 73.42. At 14:45 UTC, USD/INR trades -0.2% at 73.27. The pair is on track to gain 0.2% across the week, its first weekly gain in 8 weeks.

The Indian Rupee was tracing domestic equities higher on Friday. Both the Sensex and the Nifty 50 once again surged to record highs, boosted by IT services stocks which powered higher as the sector kicks off its third quarter earning season.

The Nifty closed +1.5% at 14,347 whilst the Sensex gained 1.4% closing at 48782. Equity markets across the globe pushed higher on the prospect of a solid economic recovery later in the year.

Economists at MUFG Bank, however, are more cautious on the Rupee, expecting further declines. The Bank expects the RBI to conduct further easing across the year and continuous usage of unconventional policy tools.

After a stronger start the US Dollar has fallen lower across the board following disappointing US Labour Department jobs data. The closely watched non-farm payroll report showed that 140,000 jobs were lost in the US across December, the first monthly loss since April in the first covid peak and lockdown. This was down from 245,000 added in November and well b elow forecasts of 71,000.

The headline figure highlights thew impact that rising covid cases and tighter lockdown restrictions continue to have on businesses, causing the labour market recovery to start reversing.

The market reaction has been relatively muted, and this is because investors are already looking beyond this temporary period of economic weakness and are instead focusing on the increased probability of higher fiscal spending in the coming months and mass distribution of a covid vaccine  to get the US economy back on track.