The Reserve Bank is likely to raise inflation forecasts at next month’s Monetary Policy Committee (MPC) meeting and would also consider a rate hike to tame inflation that is above its comfort level.
The Reserve Bank is likely to raise inflation forecasts at next month’s Monetary Policy Committee (MPC) meeting and would also consider a rate hike to tame inflation that is above its comfort level.
The rupee fell 30 paises to 77.55 against the US dollar at the open on Thursday, as a lackluster trend in domestic stock markets and a firm US currency weighed on investor sentiment.
Also, continued outflows of foreign funds and elevated crude oil prices impacted the domestic unit, forex traders said.
On the interbank foreign exchange exchange, the rupee opened significantly lower at 77.52 against the US dollar, then lost further ground to trade at 77.55, down 30 paise from the last close. The local currency has traded in a range of 77.50 to 77.57 on initial transactions.
In the previous session, the rupee had settled at 77.25 against the US currency.
The Dollar Index, which measures the dollar’s strength against a basket of six currencies, traded 0.10% higher to 103.95.
On the domestic stockmarket front, the 30-piece Sensex was down 822.94 points, or 1.52%, to 53,265.45, while the broader NSE Nifty was down 239.30 points, or 1.48%, to 15,927.80.
Global oil benchmark Brent crude futures fell 1.11% to $106.32 a barrel.
The Reserve Bank is likely to raise inflation forecasts at next month’s Monetary Policy Committee (MPC) meeting and would also consider a rate hike to tame inflation, which sources say is above its comfort level.
The MPC, led by the RBI governor, is scheduled to meet between June 6-8. It has been mandated to keep retail inflation in the 2-6% range.
American broker Morgan Stanley on Wednesday cut its growth estimate for India for 2022-23 and 2023-24 by 30 basis points amid global headwinds and warned that macro stability indicators such as inflation will “deteriorate” going forward.
According to sources, a tightening of interest rates by major central banks, including the RBI, would negatively impact demand over the next 6-8 months and slow down the recovery process.
In addition to the Reserve Bank of India (RBI), several central banks, including the US Federal Reserve and the Bank of England, have raised interest rates in a bid to stem inflation exacerbated by the Russia-Ukraine conflict.
Overseas institutional investors remained net sellers in the capital market on Wednesday, selling shares worth Rs 3,609.35 crore, according to stock market data.
