Mumbai: Rising for the third straight session, the rupee on October 4 gained 13 paise to end at 66.46 after the RBI surprisingly cut key interest rates by 0.25 per cent. Heavy dollar selling by banks and exporters alongside debt-related inflows largely supported the rupee momentum despite buoyant greenback overseas.
In the first monetary policy review under RBI Governor Urjit Patel, the repo rate was slashed by 0.25 per cent to 6.25 per cent in a unanimous decision by the new rate-setting panel, or MPC. But the central bank warned of risks to growth next year due to muted private investments and weak global demand coupled with geopolitical risks.
The rupee resumed firmly higher at 66.53 as compared to yesterday's closing level of 66.59 at the Interbank Foreign Exchange (Forex) Market on sustained bouts of dollar selling by exporters and traded in a narrow range most part of the day with positive bias ahead of policy meet.
However, an initial sharp reaction to the widely expected rate cut, the home currency hit a one-month high of 66.38 in late afternoon deals before ending at 66.46, showing a smart rise of 13 paise, or 0.20 per cent. It briefly touched a low of 66.61 in early trade.
The domestic currency has appreciated by a whopping 39 paise in three days. Sporadic dollar purchases by importers amid talks of RBI presence also largely kept rupee under check, a forex dealer commented.
In worldwide trade, the American dollar strengthened broadly against a basket of leading currencies on the back of upbeat US macro-economic data following a sharp bounce in the US manufacturing PMI in September after an unexpected drop to 49.4 in August.
The strong report once again fuelled expectations that the Federal Reserve will start raising interest rates this year. Meanwhile, pound sterling plunged to a three-decade lows against its major trading partners after UK Prime Minister Theresa May said Britain will begin the formal process of leaving the European Union by end March next year.
The dollar index was trading up by 0.63 per cent at 96.25 as against a basket of six currencies in late afternoon trade. The RBI on October 4 fixed the reference rate for the dollar at 66.5559 and euro at 74.4428.
In cross-currency trades, the rupee maintained its strong edge against the pound sterling and finished at 84.68 from 85.70 and hardened against the Japanese yen to close at 64.87 compared to 65.70 per 100 yens on Friday. It also recovered against the euro to settle at 74.20 from 74.81 earlier.
