Reserve Bank of India Governor Shaktikanta Das digitally delivers a statement. (PTI Photo)
Mumbai, May 4 (PTI): The rupee appreciated by 8 paise to settle at 76.40 against the US dollar on Wednesday following RBI's surprise rate hike ahead of the US Federal Reserve's policy decision.
At the interbank forex market, the domestic unit opened at 76.46 against the US dollar. It moved in the range of 76.17 to 76.58 during the session.
The rupee finally closed at 76.40, registering a rise of 8 paise over its previous close.
On Monday, the rupee had settled at 76.48 against the US dollar.
The forex market was closed on Tuesday on account of Id-Ul-Fitr.
The RBI on Wednesday after an unscheduled MPC meeting hiked the benchmark lending rate by 40 basis points (bps) to 4.40 per cent to contain inflation that has remained stubbornly above the target of 6 per cent for the last three months.
The Monetary Policy Committee (MPC) headed by RBI Governor Shaktikanta Das also raised the level of deposits banks are required to maintain as cash reserve by 50 bps to 4.5 per cent to suck out Rs 87,000 crore of liquidity from the banking system.
The CRR hike will be effective from May 21.
The governor said the interest rate hike is aimed at strengthening, consolidating medium-term economic growth prospects. Overall commentary of the RBI governor was hawkish and that restricted losses for the rupee, said Gaurang Somaiya, Forex & Bullion Analyst, Motilal Oswal Financial Services.
"But ahead of the important Fed policy statement we suggest that one must be cautious. Volatility for the USD-INR will continue to remain elevated and we expect it to quote in the range of 76.05 and 76.80," Somaiya said.
"Rupee outperformed among Asian currencies on expectation of foreign fund inflows, retreat of dollar index and RBI's surprise rate hike ahead of US Federal Reserve's policy decision," said Dilip Parmar, Research Analyst, HDFC Securities.
Domestic bonds plunged after the RBI raised the policy rate by 40 bps on Wednesday. India's benchmark 10-year bond yields surged nearly quarter bps.
The immediate impact of higher interest rate would be positive for rupee as real yields improve but this could also lead to foreign fund outflows from domestic equities and debt markets that will weigh on the local unit.
"The rupee remained relatively resilient among Asian currencies following the central bank's intervention and stable crude oil prices.
Spot USDINR is likely to consolidate in the range of 76.15 to 76.70. Near-term bias has turned weak and one should look for a level of 76.15," Parmar added.
According to Sriram Iyer, Senior Research Analyst at Reliance Securities, the rupee was also supported amid foreign funds flows into the local assets through the LIC IPO which opened for subscription on Wednesday.
However, investors remained cautious ahead of the Fed's decision. Asian and emerging market peers remained mixed this Wednesday evening, Iyer said.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.01 per cent lower at 103.45.
On the domestic equity market front, the 30-share BSE Sensex ended 1,306.96 points or 2.29 per cent lower at 55,669.03, while the broader NSE Nifty plunged 391.50 points or 2.29 per cent to 16,677.60.
Brent crude futures, the global oil benchmark, inched up 3.43 per cent to USD 108.57 per barrel.
Foreign institutional investors were net sellers in the capital market on Monday as they offloaded shares worth Rs 1,853.46 crore, as per stock exchange data.
Disclaimer: This story is auto-generated from news agency feeds and has not been edited by The Morung Express.
Source: PTI
