Mumbai: The Indian rupee on Monday settled 8 paise higher at 71.66 against the US dollar amid participants hoping Reserve Bank will go for another rate cut in the ensuing RBI policy review meet this week.
Forex traders said the domestic currency opened weak as investors traded cautiously after India's Q2 GDP growth dipped to an over six-yr low of 4.5 per cent, but during the day, the local unit gathered strength anticipating further easing in key rates to boost the slowing economy.
At the interbank foreign exchange, the rupee opened weak at 71.78 a dollar but soon gathered strength to touch a high of 71.62 before finally settling at 71.66, up 8 paise over its last closing.
The Indian unit on Friday had closed at 71.74 against the US dollar.
"Rupee opened on a flat note but came under pressure following weaker-than-expected GDP and fiscal number that was released on Friday," said Gaurang Somaiyaa, Forex and Bullion Analyst, Motilal Oswal Financial Services Private Ltd.
India's GDP growth hit an over six-year low of 4.5 per cent in July-September 2019, dragged mainly by deceleration in manufacturing output and subdued farm sector activity, according to official data released on Friday.
"This week, market participants will be keeping an eye on RBI Policy statement and could consider cutting rates for sixth time this year. We expect the USDINR(Spot) to quote in the range 71.70 and 72.20," Somaiyaa added.
Bankers and experts believe the Reserve Bank may cut interest rates for the sixth straight time on December 5 to support growth that has continued to slip.
The RBI has cut interest rates on every single occasion the monetary policy committee (MPC) has met since Shaktikanta Das took over as the Governor in last December.
Traders noted that the strengthening of the American dollar vis-a-vis other currencies overseas, rising crude oil prices and sustained foreign fund outflows weighed on the domestic currency.
The 30-share BSE gauge closed marginally higher by 8.36 points or 0.02 per cent at 40,802.17. The index swung between a high of 41,093.99 and a low of 40,707.63 during the day. On the other hand, the broader NSE Nifty settled 7.85 points or 0.07 per cent down at 12,048.20.
Meanwhile, foreign institutional investors (FIIs) sold shares worth Rs 1,731.33 crore on Monday, according to provisional exchange data.
The dollar index, which gauges the greenback's strength against a basket of six currencies, rose by 0.06 per cent to 98.33.
Crude oil benchmark Brent Futures rose 2.33 per cent to USD 61.90 per barrel.
The 10-year government bond yield was at 6.49 per cent in morning trade. PTI
The Financial Benchmark India Private Ltd (FBIL) set the reference rate for the rupee/dollar at 71.7255 and for rupee/euro at 78.9750. The reference rate for rupee/British pound was fixed at 92.6631 and for rupee/100 Japanese yen at 65.51.