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Mumbai, Jan 29

The rupee did not show any drastic movement and closed flat despite the RBI maintaining status quo on interest rates. The RBI’s decision favours the appreciation of the home currency, particularly if the US Federal Reserve decides to cut interest rates further. The domestic currency opened at 39.36/38 and fell to 39.40/41. It rose to 39.3750 after the RBI’s announcement of the monetary policy but ended at 39.38/39, unchanged from Monday’s close. Forex de alers reacted with surprise at the RBI’s decision. “Some traders had taken long positions as they were of the view that the RBI would announce a cut in interest rates and the rupee would depreciate. There was, therefore, a quick dollar sell-off,” said a dealer at a private bank. However, public sector banks intervened and bought dollars on behalf of RBI to stem the appreciation of the rupee. Foreign exchange traders are now awaiting the US Federal Reserve’s decision on interest rates at the meeting on Wednesday. “The RBI may not be able to hold on to the rupee at this level if the US Federal Reserve slashes interest rates further. The interest rate differential will widen significantly and more capital flows will come in,” said another forex dealer. In the forward premia market, the 6-month closed premium closed at 2.29 per cent (2.18) and the 12-month ended at 1.91 per cent (1.78).

— Our Bureau

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