MUMBAI, Dec 6: The rupee closed slightly higher, gaining 1 paisa to finish at 84.70 (provisional) against the US dollar on Friday, following the Reserve Bank of India’s decision to maintain the repo rate at 6.5 percent.
The Reserve Bank noted inflation concerns while keeping the key interest rate steady, but announced a reduction in the Cash Reserve Ratio required from banks, allowing lenders to access more funds and thus supporting a slowing economy.
Forex traders pointed out that the rupee was bolstered by a general decline in the US dollar and lower crude oil prices. However, sluggish performance in domestic markets limited significant gains.
In interbank foreign exchange, the rupee began trading at 84.66, reaching a peak of 84.53 and a low of 84.70 against the greenback over the course of the day.
The previous day, the rupee bounced back from its record low, closing with a modest gain of 4 paise at 84.71 against the US dollar.
“We anticipate the rupee may face slight downward pressure as the RBI has revised India’s GDP growth forecast for FY25 down to 6.6 percent from the prior estimate of 7.2 percent,” commented Anuj Choudhary, Research Analyst at Mirae Asset Sharekhan.
The RBI adjusted its growth outlook for the fiscal year ending March 2025 to 6.6 percent, revising it down from 7.2 percent.
Governor Shaktikanta Das, however, indicated that the GDP slowdown had reached a low point in the July-September quarter and showed signs of recovery in the following months due to seasonal spending and strong agricultural performance.
Choudhary emphasized that the demand for US dollars might continue to exert pressure on the rupee.
Nonetheless, lower crude oil prices and renewed foreign fund inflows could provide support to the rupee at reduced levels.
“Any potential intervention by the RBI could also bolster the rupee. Market participants are expected to consider the non-farm payrolls data from the US. The USD-INR spot rate is projected to fluctuate between 84.45 and 84.95,” noted Choudhary.
Additionally, the Reserve Bank disclosed an increase in the interest rate ceilings for foreign currency deposits held by the diaspora, as part of efforts to attract more capital flows in light of pressures faced by the rupee.
During the announcement of the fifth bi-monthly monetary policy for the current fiscal year, RBI Governor Das declared an adjustment in the interest rate limits on Foreign Currency Non-Resident Bank deposits (FCNR(B)) according to their tenors.
Meanwhile, the dollar index, which measures the dollar’s strength against a basket of six currencies, was up by 0.13 percent at 105.85.
Brent crude, the global benchmark for oil, decreased by 0.33 percent to USD 71.85 per barrel in futures trading.
On the domestic equity market side, the 30-share benchmark index Sensex fell by 56.74 points, or 0.07 percent, to close at 81,709.12 points, while the Nifty slipped by 30.60 points, or 0.12 percent, to finish at 24,677.80 points.
Foreign Institutional Investors (FIIs) were net buyers in the capital markets on Thursday, acquiring shares worth Rs 8,539.91 crore, as per exchange data. (PTI)
