Indian rupee falls to 54.30 per dollar
The Indian rupee fell to 54.30 per dollar, losing about 0.6 per cent after the Reserve Bank of India cut the repo rate by a quarter per cent.
The rupee in earlier trade had risen to 53.97 per dollar on hopes that the central bank will cut the cash reserve ratio by 25 basis points.
The rupee is likely to depreciate from the current levels on RBI remarks on limited room for further rate cuts/
"Even as the policy stance emphasises addressing the growth risks, the headroom for further monetary easing remains quite limited," said the RBI in its note on its mid quarter policy review
"The risk of the current account deficit widening further because of the stimulus offered by the rate cut is much less than apprehended," said Subbarao referring to the forecast more than 6 per cent CAD for the January quarter. "When growth is sluggish as is the case now, the rate cut is unlikely to translate into import demand."
But inflation remains a spanner in the works. WPI for February was at 6.84 per cent, higher than the 6.62 per cent in January. But core inflation was at 3.8 per cent. Consumer prices, a measure the governor began to pay more attention to, continues climbing. CPI inflation rose to 10.9 per cent y-o-y in February from 10.8 per cent in January.
"Rupee would continue to falter," said a senior dealer from UBS.