Rupee trades in narrow range against US dollar ahead of RBI monetary policy outcome

Rupee vs Dollar

The Indian rupee was stable against the US dollar in early trading on Thursday as investors awaited the Reserve Bank of India’s monetary policy announcement. Market participants are keen to hear the central bank’s views on recent events and its assessment of high food inflation. Foreign fund outflows and an increase in Brent crude prices also contributed to negative investor sentiment. At the interbank foreign exchange, the rupee started at 83.94 against the dollar, then touched 83.93, marking a slight increase of 2 paise compared to its previous close. On the previous day, the rupee traded within a narrow range and ended the day down by 3 paise at 83.95 against the US dollar. Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP, noted, “The Indian rupee closed at 83.95 on Wednesday, near the psychologically significant level of 84.00.

The market will wait for the monetary policy announcement before assessing if the RBI will allow the rupee to depreciate further beyond 83.96.” In global markets, the dollar index, which measures the greenback’s strength against a basket of six currencies, was down by 0.13 percent at 103.06. Brent crude, the global oil benchmark, rose by 0.43 percent to USD 78.67 per barrel.

The Indian Central Bank is expected to maintain interest rates for the ninth consecutive month. However, investors are hoping for a more accommodative stance. Although the market does not predict a rate cut in the upcoming October meeting, the first cut may take place in February 2025. Bhansali added, “The market is eager to hear the central bank’s assessment of recent events and its outlook on food inflation, which remains high at around 7 percent, with vegetable inflation at approximately 30 percent.”

The RBI’s rate-setting panel commenced its three-day deliberations for the next bi-monthly monetary policy on Tuesday. The decision of the Monetary Policy Committee, led by RBI Governor Shaktikanta Das, will be announced later in the day. In domestic equity markets, the Sensex dropped by 251.76 points, or 0.32 percent, to 79,216.25 points, while the Nifty fell by 83.80 points, or 0.34 percent, to 24,213.70 points. According to exchange data, foreign institutional investors (FIIs) were net sellers in the capital markets on Wednesday, offloading shares worth Rs 3,314.76 crore.