As traders remained on the sidelines ahead of the Reserve Bank of India’s (RBI) monetary policy meeting, the Indian rupee began slightly lower at 90.5200 on February 5. This was after it had recovered from its record lows reached in the previous sessions, which were triggered by the US-India trade pact.
As of right now, the local currency is trading at 90.4600, up from 90.4400 during the previous session. The central bank and importers were observed purchasing the US dollar on Wednesday, which caused the rupee’s surge to stall. The RBI intends to limit any further appreciation of the currency beyond Rs 90, and rupee levels were deemed attractive near the psychological 90 level.
Since foreign portfolio investors (FPIs) are now not purchasing dollars, the rupee appears to be in a range-bound mode. Rather, to reduce their short positions and provide the market with the required liquidity, the RBI is purchasing dollars.
In a three-year dollar/rupee buy-sell swap auction held by the RBI on Wednesday, substantial bids were received, and nearly $25 billion was deployed, compared to the notified $10 billion.
Traders will now anticipate the monetary policy committee (MPC) meeting on Friday, where the central bank is anticipated to maintain its “neutral” posture and keep rates unchanged. The RBI’s liquidity measures will continue to be the main focus.
