Rupee recovers 9 paise from all-time low level to close at 87.50 against US dollar

Mumbai, Feb 7 (PTI) The rupee recovered 9 paise from its all-time low level to close at 87.50 against the US dollar on Friday after the Reserve Bank of India reduced the key policy rate by 25 basis points in line with street expectations.

The Monetary Policy Committee (MPC), headed by RBI Governor Sanjay Malhotra, slashed the repo rate by 25 basis points to 6.25 per cent. This was the first reduction since May 2020 and the first revision after two-and-a-half years.

At the interbank foreign exchange, the rupee opened at 87.57, touched an intra-day high of 87.33 and a low of 87.57 against the greenback during the session.

The local unit finally settled for the day at 87.50 against the US dollar, registering a rise of 9 paise over its previous close.

On Thursday, the rupee plunged 16 paise to close at an all-time low of 87.59 against the US dollar.

"We expect the rupee to trade with a negative bias amid weak domestic markets and dollar demand from importers. Risk aversion in global markets amid ongoing uncertainty over US trade tariffs may also weigh on the rupee," said Anuj Choudhary -- Research Analyst at Mirae Asset Sharekhan.

The RBI cut repo rate by 25 bps to 6.25 per cent from 6.5 per cent, which was in line with street expectations, Choudhary said, adding, "thus, markets did not react too sharply." Jateen Trivedi, VP Research Analyst - Commodity and Currency, LKP Securities, said the RBI remains cautious on global risks, including trade tensions and financial volatility.

"Despite the minor rupee bounce, further stability depends on FII flows and global market sentiment. The rupee range is expected to stay between 87.25-87.60," he added.

Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.04 per cent lower at 107.64.

Brent crude, the global oil benchmark, rose 0.90 per cent to USD 74.96 per barrel in futures trade.

Reserve Bank Governor Sanjay Malhotra on Friday said the exchange rate policy has remained consistent over the years and the central bank does not target any "specific level or band" of the rupee, which slipped to an all-time low of 87.59 against the US dollar on Thursday.

"We should not be looking at day-to-day volatility in rupee", but focus on long-term exchange rate, he said.

Malhotra added that the RBI was committed to taking carefully calibrated monetary policy decisions to facilitate conducive macroeconomic conditions that reinforce price stability, sustained economic growth and financial stability.

The local unit has lost over 2 per cent so far this year. The sharp drop in the domestic unit comes after nearly a 3 per cent fall in the USD/INR pair in 2024, making it one of the worst-performing Asian currencies.

On January 1, 2024, the rupee was at 83.21 against the greenback.

The domestic unit has lost 186 paise from the closing level of 85.64 recorded on January 1 this year.

Forex traders said the rupee is trading with a negative bias over the global trade war as market participants mulled the impact of tariffs being imposed by the US and China.

In the domestic equity market, the 30-share BSE Sensex settled 197.97 points, or 0.25 per cent, lower at 77,860.19 points, while the Nifty was down 43.40 points, or 0.18 per cent, at 23,559.95 points.

Foreign institutional investors (FIIs) offloaded equities worth Rs 470.39 crore in the capital markets on a net basis on Friday, according to exchange data.

India's forex reserves rose USD 1.05 billion to USD 630.607 billion for the week ended January 31, the RBI said on Friday.

In the previous reporting week, the overall reserves had increased by USD 5.574 billion to USD 629.557 billion.

This is the second consecutive week of an increase in the reserves, which have otherwise been on a declining trend for the last few weeks due to revaluation along with forex market interventions by RBI to help reduce volatilities in the rupee. PTI DRR HVA

Source: PTI