New Delhi: The Indian rupee is expected to open slightly stronger on Friday as markets wait for the Reserve Bank of India’s monetary policy announcement. The currency’s move comes after a small recovery on Thursday that ended a six day losing streak and brought temporary relief to traders and investors.
On Thursday the rupee had touched a record low of 90.42 against the US dollar before bouncing back to around 89.98. The recovery was mainly driven by dollar selling from exporters and some traders who had earlier bet against the currency. Market participants said the bounce eased immediate pressure but concerns over the rupee’s overall weakness remain.
Analysts say the currency has been under stress due to a shortage of dollar inflows including lower foreign investment and weaker demand for Indian assets. The rupee has also been affected by a strong US dollar and rising costs of imports such as crude oil.
The Reserve Bank of India’s policy decision is expected to play an important role in shaping sentiment. Economists are divided on whether the central bank will cut interest rates or maintain its current stance. Traders will also be watching the RBI’s comments to see if the bank signals new steps to attract foreign capital or support the currency.
Meanwhile the rupee continues to be one of the weakest performing Asian currencies this year after losing more than five percent of its value against the US dollar. The fall has affected several groups including students studying abroad and businesses that depend on imported goods as their costs have risen sharply.
Exporters however may benefit from the weaker currency as they receive more rupees for every dollar earned. Even so experts caution that global demand uncertainty could limit any advantages.
Financial markets are expected to remain cautious until the RBI announces its decision later on Friday. Traders say the next few weeks will be important for the rupee’s direction as global and domestic economic conditions unfold.