Rupee gains to 81.55 per dollar from 81.86 in the previous session
The rupee gained a touch ahead of the Reserve Bank of India's policy decision on Friday, extending its strengthening pattern for the second straight day, driven by the lower-than-expected widening of the country's current account deficit and as the dollar pulled back further from multi-year highs.
Bloomberg quoted the rupee last changing hands at 81.55 per dollar, well off its record lows of 81.95, after opening at 81.58, compared to its previous close of 81.86.
"All eyes are on today's RBI monetary policy if it takes any steps to address the sharp and continued run in USDINR as other central banks did," said Amit Pabari, Managing Director of CR Forex Advisors.
Markets await the Reserve Bank of India's policy decision at 10.00 am, with the central bank likely to announce a 50-basis-point rate increase for the third time in a row, driven by rising Treasury yields, aggressive Federal Reserve, and the resulting pressure on the rupee.
"In the context how quickly the rupee has fallen over the last few days, we think it is almost certain the RBI will deliver a 50 basis point hike and a hawkish commentary," a trader at a Mumbai-based bank told Reuters.
What likely boosted the rupee is latest current account data.
In the June quarter, India's current account deficit, a crucial measure of the country's balance of payments condition, widened to 2.8 per cent of GDP at $23.9 billion, primarily due to a larger trade deficit.
But that number was lower-than-expected, according to a Reuters poll.
"A slightly larger services surplus, and remittances, ensured the deficit did not widen dramatically," Rahul Bajoria, Chief India Economist at Barclays Bank, told Reuters.
Mr Bajoria expects the CAD to remain elevated in the coming quarters, thanks to the revival in domestic demand and the ongoing impact of elevated commodity prices, reported Reuters.
