Rupee Advances on Weak US Jobs Data, Eyes Federal Reserve Rate Cut Despite Pressure from Tariffs

The rupee advanced on Tuesday, supported by weaker U.S. jobs data that firmed up expectations of a Federal Reserve rate cut, before losing traction around the 88 per dollar level.

The rupee has been among the worst performing Asian currencies this year, pressured by the punitive U.S. tariffs on Indian goods that have dented sentiment and fuelled sustained dollar demand.

The rupee rose 0.18% to 88.1025 against 88.2650 on Friday, when it fell to a record low of 88.36. The Indian FX market was closed on Monday.

Most Asian currencies traded higher on Tuesday except for Indonesian rupiah, which was down 1.04% after the abrupt ouster of the nation's influential finance minister. The dollar index was down 0.08%.

On the session, the rupee briefly breached the 88 mark, hitting an intraday high of 87.9550. The 87.95 level, which marks a prior all-time low, remains a key threshold.

"While softer U.S. data and potential Fed policy shifts could provide some support to the rupee, India’s trade and tariff headwinds may cap any recovery, keeping upside risks intact," said Amit Pabari, managing director at CR Forex.

Weak U.S. jobs growth in August has heightened expectations that the U.S. central bank will cut rates by at least 25 basis points next week, with total cuts of around 75 basis points expected for the remainder of the year.