The Indian rupee gained strength on Friday, mirroring the upward trend in most regional currencies, which were buoyed by a weaker US dollar. Market participants are eagerly anticipating the Reserve Bank of India's (RBI) monetary policy decision.
The rupee appreciated by approximately 0.1% to 23.0667 at 8am UAE time, compared to its previous close of 23.08787 on Thursday. The RBI has scheduled its policy announcement at 8.30am UAE time.
Analysts anticipate the central bank to implement some form of policy easing, possibly through a reduction in banks' cash reserve ratios (CRR), following India's economic growth decelerating to a seven-quarter low in the July-September quarter. However, persistent high inflation may deter the RBI from cutting interest rates immediately.
Traders speculate that an unexpected rate cut by the RBI or more dovish-than-expected policy statements could weaken the rupee, potentially driving it to a new record low. Earlier this week, the currency reached a lifetime low of 84.7575.
The central bank's policy decision will also be crucial for dollar-rupee forward premiums, according to traders. The one-year dollar-rupee implied yield has decreased by 25 basis points this December, influenced by expectations of policy easing and the central bank's recent dollar-rupee buy/sell swaps.
Amit Pabari, managing director at FX advisory firm CR Forex, noted, "The rupee could benefit from the RBI’s efforts to manage liquidity in the banking system," adding that he anticipates potential downside for the rupee to be limited to 85.
Asian currencies generally rose by about 0.1% on the day, while the dollar index stood at 105.8 after declining 0.5% on Thursday, ahead of closely watched US labour market data due later on Friday. Economists surveyed by Reuters predict the US economy to have added 200,000 jobs in November, with the unemployment rate expected to rise to 4.2% from 4.1% in the previous month.
Source link: https://www.khaleejtimes.com
