USD/INR drops to fresh multi-week lows below 71 ahead of NFP

• USD/INR loses traction after consolidating above 71 during Asian session.
• Experts expect rupee to weaken over 1% against USD in 2020.
• Coming up: US Nonfarm Payrolls data for December.

After moving sideways in a relatively tight range above the 71 handle during the first half of the day, the USD/INR pair came under renewed pressure in the last hours and touched its lowest level since mid-December at 70.853. As of writing, the pair was down 0.35% on a daily basis at 70.958.

EM currencies capitalize on risk-on flows

Improved market sentiment amid easing geopolitical tensions in the Middle East help emerging market (EM) currencies such as the INR find demand in the second half of the week. 

However, a recently conducted Reuters poll showed that market experts don't expect the rupee to outperform the USD in 2020. According to a January 3-9 survey of over 50 strategists, the rupee is expected to lose more than 1% against the greenback in a 12-month view with the USD/INR pair rising to 72 in that period.

Later in the day, the monthly Nonfarm Payrolls report from the US will be looked upon for fresh impetus. Ahead of the data, the US Dollar Index is up 0.08% on the day at 97.50.

Previewing the data, "we expect headline job gains to be on the weak side, but recommend looking through such weakness, as it would likely be due to adverse seasonal effects,” said Standard Chartered analysts.

US NFP Preview: 8 Major Banks expectations from December payrolls report

Technical levels to watch for