Rupee Opens Higher Against US Dollar On RBI Optimism, MPC Maintains Status Quo

As the Reserve Bank of India (RBI) opted to keep repo rate unchanged at 6.50%, Indian rupee opened slightly higher against the US dollar. Rupee is trading at 83.21 against the US dollar, up 0.05% from its earlier close of 83.26. Meanwhile, the 10-year bond yield opened slight changed to 7.21% from its last day close of 7.21%. RBI governor Shaktikanta Das expects headline inflation to further ease in September.

Inflation is likely to hover back to the 2 to 6% target range for September period however, policymakers will keep other factors into perspective that will include erratic weather conditions and soaring oil prices.

Rupee on Thursday paired initial gains and closed at 3 paise lower at 83.27 against the US Dollar as a result of recovery in the American currency. Meanwhile, forex traders said the rupee consolidated in a narrow range as investors opted to stay on the sidelines ahead of the Reserve Bank of India's rate decision, according to a PTI report.

According to Reuters, "It (the rupee) clearly is not freely floating, and I would be very surprised if this is not being heavily managed in this tight range by the RBI - it has little, if anything, to do with fundamentals," said Robert Carnell, regional head of research, Asia Pacific at ING. "The USD higher-for-longer narrative has been gaining ground and so the outlook for all FX versus the USD is looking a little weaker."

The Reuters report stated, "USD/INR could remain in a tight range in the near-term given dollar strength and volatile crude, but could modestly appreciate over 12 months as (balance of payments) fundamentals improve and the U.S. dollar subsides," said Dhiraj Nim, FX strategist at ANZ.