Daijiworld Media Network - Mumbai

Mumbai, Jan 11: The Indian rupee continued its downward trend, closing at 85.97 against the US dollar on Friday, marking its tenth consecutive week of decline. The local currency fell by 12 paise from Thursday’s close of 85.85 and is now poised to breach the 86 marks by Monday, following a surge in the dollar index after stronger-than-expected US non-farm payroll data.

US job growth exceeded expectations, with the unemployment rate dropping to 4.1%, and 10-year US bond yields rising to 4.77%. This has reduced the appeal of equities and risk assets for investors. Veteran banker Uday Kotak noted, “If ‘risk-free’ assets like US bonds yield around 5%, emerging markets need to manage external accounts carefully.” The stronger dollar has put significant pressure on the rupee, with emerging markets struggling to balance their external accounts.

As part of the Reserve Bank of India's (RBI) efforts to defend the currency, India's foreign exchange reserves have continued to fall. As of January 3, the reserves dropped by $5.7 billion to a 10-month low of $634.6 billion, marking the fifth consecutive week of decline. The rupee’s weakness has been further exacerbated by foreign portfolio investors pulling out from Indian equities.

The forex market is closely monitoring US non-farm payroll data, as it remains a key indicator of employment trends. Forex consultant KN Dey suggested that if the data indicates improvement, the dollar index could rise further, leading to a gap opening on Monday. Meanwhile, speculation continues about the stance of RBI’s new Governor Sanjay Malhotra, who has completed his first week in office but has yet to publicly address his approach to growth, inflation, and exchange rate policies.