Indian Rupee Softer against US Dollar Following RBI Interest Rate Decision

The Indian Rupee closed out the local session in a softer position against its US peer as Dollar demand increased ahead of the publication of minutes from the latest Federal Open Market Committee (FOMC) policy meeting. The Rupee had previously gained on a broadly softening ‘Greenback’ as the US Non-Farm Payrolls report failed to show the jobs gain expected by economists.

However, the Rupee fluctuated on Tuesday as the Reserve Bank of India delivered its interest rate decision. The central bank opted to leave borrowing costs unchanged in its first gathering of the new fiscal year. Economists had largely expected the repo rate to be held at 7.5% as the RBI has previously intimated that it wants to assess the impact of previous adjustments before taking further action. The decision saw economist Devika Mehndiratta state; ‘This is like pinching banks to lower lending rates. On inflation, they are not too alarmist on upside risks.’

RBI Governor Rajan announced at the time; ‘Going forward, the accommodative stance of monetary policy will be maintained, but monetary policy actions will be conditioned by incoming data.’ A lack of US data did limit the USD/INR exchange rate’s movement, but further volatility in the pairing could occur following the release of the FOMC minutes. A hawkish tone from the Fed would be US Dollar supportive. However dovish remarks may see the USD/INR exchange rate fall as the week progresses. Investors with an interest in the USD/INR currency pair will also be looking to Friday and the publication of India’s trade balance, industrial production, inflation rate and manufacturing production numbers plus Thursday’s US initial jobless and continuing claims numbers.

On Tuesday the US Dollar to Indian Rupee exchange rate was trading in the region of 62.3160 and the Pound Sterling to Indian Rupee exchange rate was trading in the region of 92.5840.