The rupee rose 10 pounds to settle at 75.93 against the US dollar on Friday, with the Reserve Bank of India maintaining the status quo for the benchmark lending rate.
Announcing the monetary policy, Reserve Bank of India Governor Shaktikanta Das said that the Indian economy has large foreign exchange reserves and that it stands ready and determined to defend the economy.
Meanwhile, the benchmark 10-year bond yield jumped to 7.06 percent, the highest since June 2019 as the Reserve Bank of India raised its headline consumer price inflation forecast to 5.7 percent.
In the forex interbank market, the local unit opened at 75.99 against the US dollar and touched the intraday high at 75.70 and finally closed at 75.93, recording an increase of 10 pounds from the previous close.
On Thursday, the rupee fell 19 pesos to close at 76.03.
“The rupee underperformed among Asian currencies after the Reserve Bank of India kept the interest rate unchanged and announced measures to remove excess liquidity from the system,” said Dilip Parmar, analyst at HDFC Securities.
Parmar added that they “also revised downward growth and raised the inflation figure for the current year on the back of higher commodity prices. In short, the Central Bank paved the way for removing the consensual stance and raising the inflation rate forward.”
“Local stocks rose while the rupee erased most of its gains after central bank policy decisions and the benchmark 10-year bond yield rose to 7.06 percent, the highest level since June 11, 2019.
In the near term, spot USDINR is expected to trade in the range of 76.20 to 75.70,” Parmar noted.
According to Sriram Iyer, Senior Research Analyst at Reliance Securities, “The rupee appreciated against the US dollar on Friday as the Central Bank of India hinted at an exit from its easy monetary stance. However, crude oil prices rebounded again in the Friday afternoon session and capped a price rally Crude oil. Domestic unit.”
On the inflation front for the fiscal year starting on April 1, the Reserve Bank of India raised its headline consumer price inflation forecast to 5.7 per cent from 4.5 per cent earlier.
On a weekly basis, the rupee depreciated by 19 pounds against the US dollar.
“In the meantime, the local unit ended the week on a weaker note against the dollar, tracking a sharp sell-off in US Treasuries amid expectations of a strong withdrawal of policy support by the Federal Reserve,” he added.
The US dollar strengthened towards 100 for the first time in nearly two years on Friday in trading in Asia, boosted by the prospect of a more aggressive pace of interest rate hikes by the Federal Reserve.
Meanwhile, the dollar index, which measures the strength of the US currency against a basket of six currencies, was trading 0.12 percent higher at 99.87.
This is the eleventh consecutive time that Das’ MPC has maintained the status quo and left the benchmark lending rate unchanged at 4 per cent.
The Reserve Bank of India (RBI) last revised its policy repo rate or short-term lending rate on May 22, 2020 in an out-of-policy cycle to increase demand by cutting the interest rate to a historic low.
In terms of the local stock market, the 30-share BSE Sensex index ended up 412.23 points, or 0.70 percent, at 59447.18, and the broader NSE Nifty index rose 144.80 points, or 0.82 percent, to 17,784.35.
Brent crude futures, the global oil standard, rose 0.99 percent to $101.58 a barrel.
Foreign institutional investors remained net sellers in the capital market on Thursday, offloading shares worth Rs 5,009.62 crore, according to stock exchange data.
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