Rupee Advances Against US Dollar on Trade Deal Hopes, Eyes on RBI Policy
The Indian rupee opened stronger on Friday, appreciating by 9 paise to trade at 90.25 against the US dollar. This upward movement reflects a positive sentiment in the currency markets, primarily driven by optimism surrounding the potential India-US trade agreement. However, traders are exercising caution as they await the Reserve Bank of India's monetary policy decision, which is scheduled for announcement later in the day.
Market Dynamics and Previous Session Performance
The rupee's early gains follow a robust performance in the previous trading session. On Thursday, the currency closed higher by 13 paise at 90.34 against the greenback. During that session, the rupee opened at 90.52 in the interbank foreign exchange market. It reached an intraday high of 90.06 and a low of 90.53 before settling at 90.34, marking a notable gain over the previous close.
Forex traders have noted that while market sentiment has improved due to trade deal prospects, the rupee's appreciation is being tempered by significant corporate demand for US dollars and a general weakness in domestic equity markets. This combination of factors is creating a constrained trading environment for the currency.
Scrutiny Over Trade Deal Details and RBI Policy Deliberations
Market participants are reportedly shifting from initial optimism to a more scrutinous stance regarding the India-US trade deal. Neither country has released formal documents outlining the specifics of the agreement, leading to uncertainty and a cautious approach among investors and traders.
All eyes are now firmly on the Reserve Bank of India, where the six-member Monetary Policy Committee, led by Governor Sanjay Malhotra, began its deliberations on Wednesday. The policy outcome is set to be announced on Friday morning. Financial experts suggest that the RBI, having already reduced the repo rate by 125 basis points since February of last year, may opt to maintain a pause in rate adjustments. Nevertheless, some analysts believe another rate cut remains a possibility to further reduce borrowing costs and stimulate economic growth.
Equity Markets Reflect Cautious Sentiment
Parallel to the currency market movements, Indian equity benchmarks opened on a subdued note on Friday, slipping into negative territory as investors adopted a wait-and-watch approach ahead of the MPC decision. At the opening bell, the Nifty 50 index fell by 37 points, or 0.14%, to 25,605.80. Similarly, the BSE Sensex edged down by 64.61 points, or 0.08%, to 83,249.32.
Market sentiment remains cautious, with the RBI scheduled to announce the Monetary Policy Committee outcome at 10 am later in the day. This anticipation is influencing trading behavior across both currency and equity markets, as stakeholders seek clarity on future monetary policy directions and their potential impact on the economy.
