The Indian rupee recovered 15 paise to trade at 88.65 against the U.S. dollar on Wednesday, following the Reserve Bank of India’s (RBI) announcement of a dovish pause in its monetary policy. The move was largely in line with market expectations.
RBI Governor Sanjay Malhotra kept the key policy rates unchanged, with the repurchase rate remaining at 5.5 per cent, while the six-member monetary policy committee maintained a “neutral” stance. Malhotra indicated that the central bank could ease rates in the coming months to shield the economy from potential impacts of U.S. tariffs.
At the interbank forex market, the rupee opened at 88.79 and gradually strengthened to 88.65. The currency had hit an all-time low of 88.80 on Tuesday.
In a bid to promote the use of the domestic currency in international trade, the RBI allowed banks to lend in Indian Rupees to non-residents from Bhutan, Nepal, and Sri Lanka for bilateral transactions. The central bank also proposed establishing transparent reference rates for the currencies of India’s major trading partners and expanded the use of Special Rupee Vostro Accounts (Srva) for investment in corporate bonds and commercial papers. These measures aim to reduce reliance on the U.S. dollar and shield the economy from sudden exchange rate swings.
Meanwhile, the dollar index, which measures the greenback’s strength against a basket of currencies, was down 0.16 per cent at 97.61. Brent crude futures rose 0.24 per cent to $66.19 per barrel.
Domestic equity markets extended gains, with Sensex and Nifty trading higher, supported by strong buying in banking stocks. However, Foreign Institutional Investors sold equities worth ₹2,327.09 crore on Tuesday.
On the fiscal front, the Centre’s deficit reached 38.1 per cent of the full-year target at the end of August, compared with 27 per cent of the budgeted estimates at the same stage last year, according to the Controller General of Accounts. |
