Rupee gains 39 paise ahead of RBI policy as crude oil prices decline

The rupee appreciated 39 paise to 94.89 against the US dollar in early trade, buoyed by lower crude oil prices and optimism over US-Iran talks. Investors are now awaiting the RBI's monetary policy decision for fresh cues on interest rates and inflation.

Mumbai: The rupee gained 39 paise to 94.89 against the US dollar in early trade on Wednesday supported by falling crude oil prices following progress in US-Iran talks and a pause in planned strikes.

Forex traders said investors are closely awaiting the upcoming RBI monetary policy decision for further cues.

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At the interbank foreign exchange market, the rupee opened at 94.90, then touched 94.89, registering a gain of 39 paise from its previous close.

On Tuesday, the rupee closed at 95.28 against the American currency.

Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, was trading at 99.80, down 0.06 per cent.

Brent crude, the global oil benchmark, was trading lower by 1.11 per cent at USD 78.48 per barrel in futures trade.

On the domestic equity market front, the Sensex climbed 375.01 points to 78,803.96 in early trade, while the Nifty was up 62.7 points to 24,677.60.

Foreign institutional investors purchased equities worth Rs 2,446.47 crore on a net basis on Tuesday, according to exchange data.

Forex traders said attention has now shifted to this week’s RBI policy meeting.

The three-day meeting of the Reserve Bank of India’s rate-setting panel started on Monday amid expectations of a status quo on the benchmark repo rate, with the Monetary Policy Committee slated to announce its decision on August 5.

In June, the Reserve Bank had kept its key policy rate unchanged at 5.25 per cent and adopted a cautious wait-and-watch stance as policymakers assessed the fallout of the West Asia conflict.

The RBI policy decision is widely expected to keep the repo rate unchanged at 5.25 per cent. The real focus, however, will be on the RBI’s tone. Even if rates remain unchanged, any indication that the RBI is becoming more cautious about inflation could have a bigger impact on the rupee than the policy decision itself,” CR Forex Advisors MD Amit Pabari said.

Pabari further noted that optimism around the Hormuz talks could help the rupee test its support zone of 94.80-95.00. As “long as this holds, the pair may gradually drift back toward 95.80-96.20 over coming sessions. But if the Hormuz deal actually goes through, the rupee could see a sharper move of 30 to 40 paise on the stronger side,” he said.