The Indian rupee continued its upward movement on Friday, appreciating by 9 paise to trade at 89.80 against the US dollar in early morning sessions. This recovery comes ahead of the highly anticipated monetary policy announcement by the Reserve Bank of India (RBI), scheduled for 10:00 AM today.
A Week of Volatility and Recovery
The currency's bounce back follows a period of intense volatility where it repeatedly touched new lows. On Thursday, the rupee had opened at a weaker 90.36 at the interbank foreign exchange market but staged a remarkable turnaround. It ended the session at 89.89 against the greenback, gaining 26 paise. This recovery was supported by a combination of factors, including weakness in the US dollar index and market reports suggesting possible intervention by the central bank.
Thursday's positive close was a reversal from Wednesday's milestone, where the currency had breached the 90-per-dollar mark for the first time, closing at 90.15. The earlier decline was attributed to selling pressure from foreign institutional investors, rising crude oil prices, and lingering uncertainty surrounding the delayed India-US trade deal.
Expert Views and Economic Impact
Despite the steep decline witnessed earlier in the week, Chief Economic Adviser V Anantha Nageswaran offered a nuanced perspective on Wednesday. He stated that the rupee's depreciation is currently not having a significant impact on inflation or exports. Nageswaran explained that a weaker rupee could potentially aid outward shipments by making Indian goods more competitive, while simultaneously making imports more expensive. He cautioned, however, that sectors with heavy import dependencies—such as gems and jewellery, petroleum, and electronics—could face pressure if input costs continue to rise, which might eventually influence inflation expectations.
Market experts are closely watching the RBI's stance. Dr VK Vijayakumar, Chief Investment Strategist at Geojit Investments Limited, noted, "Rupee’s sharp recovery yesterday to 89.97 from the low of 90.42 is signalling some sort of stability in the currency market. The RBI governor’s views on the rupee today will significantly influence the near-term direction of the currency."
All Eyes on the RBI's Decision
The focus is now squarely on the central bank's policy announcement. Naveen Mathur, Director of Commodities & Currencies at Anand Rathi Shares and Stock Brokers, suggested that the apex bank might be inclined to hold the policy rate steady this time, "due to higher concerns of rupee depreciation." He emphasized that markets are also seeking clarity on the progress of the US-India trade deal, which could provide major relief to the rupee in the medium to long term.
Mathur added a technical perspective, warning, "On the higher side, a breach and successful close above 90.70 could lead the pair to test next levels at around 91.40 – 91.50 on a weekly basis." Today's RBI announcement is expected to set the tone for the currency's trajectory in the coming weeks, as traders and investors parse the central bank's language on growth, inflation, and currency management.
