A depreciation bias due ahead of the monetary policy decision on Friday continues to add further pressure on the rupee.
It opened at 87.52/$1 on Thursday, six paisa lower than its previous close of 87.465/$1. The currency was in a tight range during the day from 87.52/$1 to 87.58/$1 due to some intervention by the Reserve Bank of India, traders said.
Foreign portfolio investors sold Rs 3,549.9 crores from Indian equities on Thursday, BSE data showed.
“Everyone has gone short on the rupee, and every dip (appreciation) in the currency will be bought. There wasn’t much panic buying among importers today, as they had already hedged their positions when the currency crossed the 86.50 mark,” said Ritesh Bhansali, director at Mecklai Financial Services.
Intervention from the RBI was muted and was done to slow down the depreciation. The RBI did not hold the currency at a particular level, traders said.The monetary policy decision will be announced on Friday and markets have priced in a 25 basis point rate cut, however, the markets will be on the lookout for commentary on the trajectory of rate cuts. “If the RBI commentary is dovish in addition to a cut, then markets will price in further rate cuts during the year, causing further decline in the currency,” said Bhansali.
Along with the monetary policy meeting, markets will also be looking at the US non-farm payroll (NFP) data expected on Friday after market hours. The NFP data is one of the most important variables considered by the US Federal Reserve when it comes to deciding on the trajectory of interest rates in the US.
