Rupee Weakens To Above 79 Per Dollar After RBI Rate Hike

The rupee gained sharply early on Friday, reversing a sharp fall in the previous session, ahead of the Reserve Bank of India's policy announcement.

Rupee Weakens To Above 79 Per Dollar After RBI Rate Hike

Rupee gains sharply to below 78 per dollar

The rupee reversed early gains to weaken to above 79 per dollar after the Reserve Bank of India painted a grim picture on inflation and responded with a 50 basis points hike to its key lending rate to the highest since 2019 and for a third time in a row.

Bloomberg quoted the rupee last at 79.10 against the greenback, after opening with a sharp gain of 50 paise from its previous close of 79.4713. The currency traded in the range of 78.9288 to 79.1788 per dollar. 

RBI Governor Shaktikanta Das said, the decline in the rupee was more due to the appreciation of dollar, a global trend, rather than on account of weakness in Indian economy.

But he warned that the Indian economy has been grappling with high inflation, and price pressures are expected to remain above 6 per cent this year.

The MPC has decided to focus on withdrawal of accommodative policy stance to check inflation, said the Governor.

While Mr Das said the central bank was watching the currency's moves and were ready to act to contain any wild moves, the currency weakened after those comments. 

That even as the greenback struggled to gain a footing on Friday after falling by its sharpest pace in two weeks, as investors remained on tenterhooks ahead of the widely anticipated US jobs data and amid growing worries about a recession.

The US dollar index, which measures the greenback against a basket of currencies, fell 0.68 per cent overnight, the largest fall since July 19, and last traded 105.79.

Investors await the key US nonfarm payrolls report due at 1230 GMT, which will provide hints of how the US economy is faring. Economists in a Reuters poll expect an increase of 250,000 jobs for the month of July, after 372,000 were added in June.

"Payrolls just clearly seems to be on everyone's mind for tonight, so I think that's keeping things relatively subdued," Ray Attrill, head of FX strategy at National Australia Bank, told Reuters.