Rupee ends flat at 70.88 against dollar after RBI rate cut; local currency slumps 32 paise over a week

Mumbai: The rupee on Friday closed almost flat at 70.88 against the US dollar after the Reserve Bank of India in a widely expected move cut key interest rates by 0.25 percentage point. At the interbank foreign exchange market, the rupee had opened strong at 70.82 against the US dollar at the interbank forex market. During the day, the domestic unit fluctuated between a high of 70.78 and a low of 71.03. The rupee finally settled at 70.88, down 1 paise over its previous close. On a weekly basis, the local unit slumped by 32 paise. The Reserve Bank on Friday cut its benchmark lending rate by 0.25 percentage point to revive economic growth and affirmed commitment to remain accommodative to address growth concerns ‘as long as necessary’. [caption id=“attachment_5114261” align=“alignleft” width=“380”] Representational image. Reuters.[/caption] “Overall the policy was in line with market expectations and it did not have any major impact on the rupee,” said Rahul Gupta, Currency Head Research, Emkay Global Financial Services. Gupta further said that “the only surprise factor was a sharp cut in FY20 GDP to 6.1 percent from 6.9 percent as local economic activity has weakened along with a slowdown in the global economy and lingering geopolitical tensions”. In the fourth bi-monthly review of the policy, the RBI sharply reduced its GDP growth estimate to 6.1 percent for FY20 as against 6.9 percent it was expecting earlier. This cut came in the wake of June quarter growth slipping to a six-year low of 5 percent, which is attributed to a slowdown in consumption, lack of new investments by the industry and also a slump in the global economy. Forex traders said markets had discounted the rate cuts. Moreover, foreign fund outflows, heavy selling in domestic equities and rising crude oil prices also kept pressure on the Indian rupee. “Going forward we are not expecting USDINR to fall below 70.50. hence the range for next week will be 70.65- 71.35,” Gupta added. Foreign funds pulled out Rs 682 crore from the capital markets on a net basis on Friday, provisional data showed. The dollar index, which gauges the greenback’s strength against a basket of six currencies, fell 0.12 percent to 98.74. Meanwhile, the 10-year government bond yield was at 6.69 percent on Friday. Brent crude futures, the global oil benchmark, rose 0.75 percent to trade at $58.14 per barrel. n the domestic market front, the 30-share Sensex ended 433.56 points or 1.14 percent lower at 37,673.31. It hit an intra-day low of 37,633.36 and a high of 38,403.54. The broader NSE Nifty plunged 139.25 points or 1.23 percent to close at 11,174.75. The Financial Benchmark India Private Ltd (FBIL) set the reference rate for the rupee/dollar at 71.1163 and for rupee/euro at 77.8927. The reference rate for rupee/British pound was fixed at 87.4195 and for rupee/100 Japanese yen at 66.39.