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Rupee ends weaker ahead of Fed’s decision on stimulus; shrugs off RBI’s status quo stance

18 Dec 2013 Evaluate

Indian rupee, shrugged off early gains and ended weaker on Wednesday, despite the sharp surge of local equities after RBI, in a positive surprise for the market, maintained a status quo stance on its key policy rates as it left the policy repo rate and reverse repo rate under the liquidity adjustment facility (LAF) unchanged at 7.75% and 6.75% respectively. The currency blew away all its gains by the close of trade on account of prevailing caution ahead of Fed’s decision on stimulus - a major force that has simultaneously underpinned riskier global assets and restrained the dollar in recent years. Further, sentiments at home front also took a hit to some extent after RBI in its mid-quarterly policy review underscored that high level of CPI inflation excluding food and fuel leaves no room for complacency for RBI, which will have to act accordingly, including on off-policy dates, if the expected softening of food inflation does not materialises and translates into a significant reduction in headline inflation in the next round of data releases, or if inflation excluding food and fuel does not fall.

Finally the rupee ended at 62.09, weaker by 8 paise from its previous close of 62.01 on Tuesday. The currency touched a high and low of 62.17 and 61.78 respectively. The Reserve Bank of India’s (RBI) reference rate for the dollar stood at 61.91 and for Euro stood at 85.26 on December 18, 2013. While, the RBI’s reference rate for the Yen stood at 60.16, the reference rate for the Great Britain Pound (GBP) stood at 100.8328. The reference rates are based on 12 noon rates of a few select banks in Mumbai.

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