Mumbai: The rupee surged on Tuesday after the Reserve Bank of India (RBI) left key rates steady in its policy review and as a rally in shares lifted hopes of capital inflows.
The partially convertible rupee ended at Rs48.94/95 per dollar, off an intraday peak of Rs48.76, its highest in more than a week, but still about 0.7% stronger than Friday’s close of Rs49.27/29.
“Some banks sold the rupee ahead of the policy review expecting a rate cut. However, they bought back the rupee when the policy left rates unchanged,” a dealer with a state-run bank said.
The RBI at its monetary policy review left its short-term rates and banks’ cash reserve requirements unchanged as it waited to gauge the impact of its aggressive easing since mid-October to stem a sharp economic downturn.
Traders said a rally in local equities also lifted sentiment for the local unit.
The Sensex climbed 3.8% on Tuesday in its biggest one-day rise in seven weeks.
Foreign investors have so far this month pulled out more than $1 billion from domestic markets after withdrawing more than $13 billion in 2008.