Rupee closes lower against US dollar after RBI keeps rates unchanged
Mumbai: The Indian rupee on Wednesday closed weaker against the US dollar after the Reserve Bank of India (RBI) kept key policy rates unchanged as it feared that inflation may top the central bank’s medium-term target of 4%.
The home currency ended at 64.52 a dollar, down 0.20% from its Tuesday’s close of 64.39. The rupee opened at 64.47 a dollar and touched a high and a low of 64.39 and 64.50, respectively.
The decision was in line with market expectations as most economists expected the central bank to keep the key repo rate—the rate at which it infuses liquidity in the banking system—unchanged at 6%. It also maintained its neutral policy stance. Noting several upside risks to inflation, RBI raised its fiscal second half inflation estimate range marginally to 4.3-4.7%.
The benchmark Sensex fell 0.63%, or 205.26 points, to 32597.18. So far this year, it has gained 23%.
The 10-year bond yield ended at 7.031%, compared to its previous close of 7.061%. Bond yields and prices move in opposite directions.
So far this year, the rupee has gained 5.5%, while foreign institutional investors have bought $8.75 billion and $22.59 billion in equity and debt, respectively.
Asian currencies were trading lower. South Korean won was down 0.69%, Malaysian ringgit 0.17%, Indonesian rupiah 0.16%, Philippines peso 0.14%, Singapore dollar 0.08%, China offshore 0.04%. However, Japanese yen was up 0.35%, China renminbi 0.07%.
The dollar index, which measures the US currency’s strength against major currencies, was trading at 93.366, down 0.01%, from its previous close of 93.379.