Rupee gains 9 paise against dollar after RBI policy
The rupee strengthened 9 paise against the US dollar after the Reserve Bank of India's mid-quarter monetary policy announcement.
Rupee opened at 57.71 in the morning and appreciated to 57.62. On Friday rupee closed at 57.53 levels. RBI kept the key rate unchanged, citing evolving growth-inflation dynamic, the balance of risks as well as recent developments in the external sector as the main factors.
The market had factored in no repo rate cut- the rate at which the Reserve Bank of India lends to banks.
RBI said that the most significant development in the external sector has been the movement in the exchange rate. The rupee has depreciated 5.8% against the US dollar during the current financial year up to June 14. It fell by 6.6% during May 22-June 11 due to sell-off by foreign institutional investors, reflecting risk-off sentiment triggered by apprehensions of possible tapering off of quantitative easing by the US Fed.
"Rupee has lost because of the hawkish stance by the Reserve Bank of India although a 25 basis point cut is already factored in," said a market dealer. "Also ECB cutting rates by 25 basis oints has led to rupee weakening in line with the Euro."
RBI said that the monetary policy stance will be determined by how growth and inflation trajectories and the balance of payments situation evolve in the months ahead.