India’s currency remains under pressure from foreign outflows and expensive oil as markets await a central bank rate decision on Wednesday.
The rupee opened at 96.20 to the US dollar on Monday and weakened to 96.26, one paisa below its previous close. After falling on Thursday, it ended at 96.25, its weakest level in more than two months. Markets were shut on Friday for Mahatma Gandhi Jayanti. Forex traders said the Reserve Bank of India periodically intervened to limit sharp intraday swings.
High import costs, a strong dollar and continued foreign fund selling weighed on sentiment. India’s reserves fell by $18.343 billion to $747.557 billion in the week ended September 25, after a $14.881 billion decline in the previous week.
Most economists expect the RBI’s monetary policy committee to raise its rate by 25 basis points to 5.50 per cent on Wednesday. Markets are also watching US services data, Federal Reserve minutes and reports about damage to Saudi infrastructure.
Anindya Banerjee of Kotak Securities said a Fed hold in October and an RBI increase were already priced in, while confirmed Saudi damage could lift Brent. On Monday Brent traded at $101.34 a barrel and the dollar index stood at 102.47.
Foreign institutional investors sold a net Rs 9,484.22 crore in equities on Thursday. Indian shares nevertheless opened higher, with the Sensex up 413 points to 72,315 and the Nifty gaining 131.55 points to 22,554.20.