The rupee is up 8 paise to close at 76.40 against the US dollar as the RBI hikes interest rates


The forex market was closed Tuesday for Eid-Ul-Fitr.

The forex market was closed Tuesday for Eid-Ul-Fitr.

The rupee appreciated 8 paise to 76.40 (prelim) against the US dollar on Wednesday after the RBI’s surprise rate hike ahead of the US Federal Reserve’s monetary policy decision.

In the interbank foreign exchange market, the domestic unit opened at 76.46 against the US dollar. It ranged from 76.17 to 76.58 during the session.

The rupee finally closed at 76.40, up 8 paise from its previous close.

On Monday, the rupee settled at 76.48 against the US dollar.

The forex market was closed Tuesday for Eid-Ul-Fitr.

The RBI raised interest rates by 40 basis points (bps) to 4.40% on Wednesday after an unscheduled MPC meeting in a bid to stem inflation, which has been stubbornly above the 6% target for the past three months.

The Monetary Policy Committee (MPC), headed by RBI Governor Shaktikanta Das, also increased the level of deposits banks are required to hold in cash reserves by 50 basis points to 4.5% in a bid to suck 87,000 crore of liquidity out of the banking system.

The CRR increase applies from May 21st.

The governor said the rate hike is aimed at strengthening and consolidating medium-term prospects for economic growth. The RBI governor’s overall comment was hawkish, limiting the rupee’s losses, said Gaurang Somaiya, a forex & bullion analyst at Motilal Oswal Financial Services.

“But ahead of the Fed’s important policy statement, we suggest that caution is needed. Volatility for USD-INR will remain high and we expect it to trade in the 76.05-76.80 range,” Mr. Somaiya said.

Meanwhile, the Dollar Index, which gauges the dollar’s strength against a basket of six currencies, traded 0.01% lower to 103.45.

On the domestic stock market front, the 30-stock BSE Sensex closed 1,306.96 points, or 2.29%, lower at 55,669.03, while the broader NSE Nifty fell 391.50 points, or 2.29%, to 16,677.60.

Brent crude futures, the global oil benchmark, rose 3.43% to $108.57 a barrel.

Overseas institutional investors were net sellers in the capital market on Monday, selling ₹1,853.46 crore of shares, according to stock market data.

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