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Rupee concludes strong on hopes of more FII inflows after 25 bps rate cut

29 Jan 2013 Evaluate

Indian rupee, shrugging off a negative start, concluded stronger on hopes of more FII inflows after the Reserve Bank of India (RBI), caving to the growing clamour for rate cuts, slashed repo rates by 25 basis points to 7.75 per cent against 8 per cent earlier. What also came as a pleasant surprise was the reduction in cash reserve ratio (CRR) of scheduled banks by 25 basis points from 4.25 per cent to 4.0 per cent of their net demand and time liabilities (NDTL) effective the fortnight beginning February 9, 2013, a move that would release around Rs 18,000 crore of primary liquidity into the banking system. However, the month end demand for dollars from the importers restricted local unit’s gains. Additionally, doubts about further easing by RBI, as it waits to see how the government's upcoming budget aims to bring a bloated fiscal deficit under control, also tempered part of local currency’s gains. Meanwhile, euro hovered within sight of an 11-month high against the dollar on Tuesday and looked poised to extend gains in coming days on growing investor confidence and a brightening outlook for the euro zone.

Finally the rupee ended at 53.77, stronger by 14 paise from its previous close of 53.91 on Monday. The currency touched a high and low of 53.95 and 53.54 respectively. The Reserve Bank of India's (RBI) reference rate for the dollar stood at Rs 53.70 and for Euro it stood at Rs 72.21 on January 29, 2013. While, the RBI’s reference rate for the Yen stood at 59.17, the reference rate for the Great Britain Pound (GBP) stood at 84.3543. The reference rates are based on 12 noon rates of a few select banks in Mumbai.

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