Mumbai: After the Reserve Bank of India (RBI) slashed interest rates and said economic growth would slow further this fiscal year, the rupee fell to its lowest level in two weeks on Tuesday.
The partially convertible rupee ended at Rs50.43/44 per dollar, 0.2% below its previous close of Rs50.33/34, taking its losses to more than 1% in the first two days of this week.
The central bank cut its key short-term lending and borrowing rates by 25 basis points each on Tuesday, and said growth in the fiscal year that began on 1 April would be about 6%, its weakest in seven years.
“We expect one more 25 basis points cut in the repo and reverse repo rate to 4.5% and 3%, respectively, at the July credit policy review,” Sailesh Jha, senior regional economist at Barclays Capital.
A weak finish on the stock market also pressured the rupee on worries that foreign investors may consolidate their holdings after recent gains.
Domestic stock markets ended down 0.7%, their third fall in four sessions, after rallying by more than a third over six weeks.
That rally in the stock market helped lift the rupee, and it is 3.4% above a lifetime low of Rs52.20 per dollar in early March.
Foreign funds have been net buyers of more than $900 million of local stocks in April, trimming their net sales in 2009 to around $425 million, exchange data showed.