According to RBI Governor Shaktikanta Das, the current policy rate of 6.5% is broadly balanced, and any justification for policy easing at this juncture can be misleading. File
| Photo Credit: The Hindu

The rupee traded in a narrow range and settled higher by 4 paise at 83.89 (provisional) against the American currency on Friday (August 23, 2024), as traders remained cautious ahead of Fed Chair Jerome Powell’s speech at the Jackson Hole Symposium.

Forex traders said the weak U.S. dollar, foreign fund inflows and a positive tone in the domestic markets supported the rupee. However, overnight gains in crude oil prices capped sharp gains.

At the interbank foreign exchange market, the local unit opened weak at 83.93 and touched an intraday high of 83.85 against the U.S. dollar. The domestic currency finally settled at 83.89 (provisional), 4 paise higher than its previous close.

On Thursday (August 22, 2024), the rupee traded in a narrow range and settled lower by 3 paise at 83.93 against the American currency.

“We expect the rupee to trade with a slight negative bias as traders remain cautious ahead of Fed Chair Jerome Powell’s speech at the Jackson Hole Symposium, which could provide some cues on the Fed’s path to cut interest rates.

“Weak US and Asian markets and a recovery in crude oil prices may pressure the rupee, while positive domestic markets may support the rupee at lower levels,” said Anuj Choudhary, research analyst at Sharekhan by BNP Paribas.

Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, was trading 0.10% lower at 101.40.

Brent crude, the global oil benchmark, advanced 1.05% to $78.03 per barrel.

On the domestic equity market, Sensex advanced 33.02 points, or 0.04%, to close at 81,086.21 points. The Nifty rose 11.65 points, or 0.05%, to 24,823.15 points.

Foreign institutional investors (FIIs) were net buyers in the capital markets on Thursday (August 22, 2024) as they purchased shares worth ₹1,371.79 crore, according to exchange data.

On the domestic macroeconomic front, the minutes of the last Monetary Policy Committee (MPC) released by the Reserve Bank of India (RBI) on Thursday (August 22, 2024) noted that the calibrated increase in policy repo rate by 250 basis points since May 2022 and subsequent change of stance to the withdrawal of accommodation have facilitated gradual disinflation over 2022–23.

According to RBI Governor Shaktikanta Das, the current policy rate of 6.5% is broadly balanced, and any justification for policy easing at this juncture can be misleading.

Representational image.
| Photo Credit: AFP

Rupee traded in a narrow range and appreciated 5 paise to 83.88 against the US dollar in morning trade on Friday (August 23, 2024) supported by easing crude oil prices and fresh foreign fund inflows.

Forex traders said significant correction in oil prices, which is hovering around USD 77 per barrel, is a major positive for the rupee, given India’s substantial oil imports.

At the interbank foreign exchange market, the local unit opened at 83.93 and then gained ground and touched 83.88, registering a rise of 5 paise from its previous close.

On Thursday, the rupee traded in a narrow range and settled lower by 3 paise at 83.93 against the American currency.

“Despite the dollar index reaching a recent low, the Indian rupee remains steadfast, showing little signs of strengthening. This resilience can be attributed to the central bank’s deliberate interventions, aimed at stabilizing the USDINR around the 83.90-95 range,” CR Forex Advisors MD-Amit Pabari said.

Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, was down 0.15 per cent to 101.35 points.

Brent crude, the global oil benchmark, was 0.12 per cent up at USD 77.31 per barrel in futures trade, “In the near term, the rupee is expected to trade within a narrow range, with an upside limit around 83.80 and support around 84.00,” Pabari added.

The domestic equity market witnessed heavy volatility in morning trade, the 30-share BSE Sensex which opened on a positive note was later trading 13.2 points, or 0.02 per cent down, at 81,039.99 points.

The Nifty also witnessed similar movement, it opened on a higher note, but soon pared the gains to trade 8.25 points, or 0.03 per cent lower at 24,803.25 points.

Foreign Institutional Investors (FIIs) were net buyers in the capital markets on Thursday as they purchased shares worth Rs 1,371.79 crore, according to exchange data.

On the domestic macroeconomic front, the minutes of the last Monetary Policy Committee (MPC) released by the RBI on Thursday noted that the calibrated increase in policy repo rate by 250 basis points since May 2022 and subsequent change of stance to the withdrawal of accommodation have facilitated gradual disinflation over 2022-23.

According to Reserve Bank Governor Shaktikanta Das, the current policy rate of 6.5 per cent is broadly balanced, and any justification for policy easing at this juncture can be misleading.

 The Reserve Bank’s Annual Report for 2023-24 said that the Indian economy is navigating the drag from an adverse global macroeconomic and financial environment.
| Photo Credit: REUTERS

Indian economy is likely to grow at 7% in the current fiscal year starting April, the Reserve Bank of India (RBI) said in its annual report released on May 30.

The Indian economy, it said, expanded at a robust pace in 2023-24 (April 2023 to March 2024 financial year), with real GDP growth accelerating to 7.6% from 7.0% in the previous year – the third successive year of 7% or above growth.

“The real GDP growth for 2024-25 is projected at 7.0% with risks evenly balanced,” it said.

India’s GDP growth is robust on the back of solid investment demand which is supported by healthy balance sheets of banks and corporates, the government’s focus on capital expenditure and prudent monetary, regulatory and fiscal policies, the RBI said. The Reserve Bank’s Annual Report for 2023-24 said that the Indian economy is navigating the drag from an adverse global macroeconomic and financial environment.

Indian economy, the report said, is well-placed to step up growth trajectory over the next decade in an environment of macroeconomic and financial stability.

“As headline inflation eases towards the target, it will spur consumption demand especially in rural areas,” it said.

It further said the external sector’s strength and buffers in the form of foreign exchange reserves will insulate domestic economic activity from global spillovers.

The report, however, added that geopolitical tensions, geoeconomic fragmentation, global financial market volatility, international commodity price movements and erratic weather developments pose downside risks to the growth outlook and upside risks to the inflation outlook.

The RBI also emphasised that the Indian economy would have to navigate challenges posed by rapid adoption of AI/ML (artificial intelligence/machine learning) technologies as well as recurrent climate shocks.

The annual report is a statutory report of RBI’s central board of directors. The report covers the working and functions of the Reserve Bank of India for the April 2023-March 2024 period.

Representational file image.
| Photo Credit: B. Jothi Ramalingam

Extreme weather conditions may pose a risk to inflation, along with prolonged geopolitical tensions that could keep crude oil prices volatile, the Reserve Bank’s April Bulletin said on April 23.

The retail based on the Consumer Price Index (CPI) has eased to 4.9% in March after averaging 5.1% in the preceding two months.

Also read: What is the outlook on the global economy? | Explained

The Reserve Bank, which mainly factors in CPI while arriving at its bi-monthly monetary policy, has kept the key interest rate unchanged at 6.5% since February 2023, citing concerns on the inflation front.

An article on ‘State of the Economy’ published in the Bulletin further said global growth momentum has been sustained in the first quarter of 2024, and the outlook for world trade is turning positive.

Treasury yields and mortgage rates are ticking up in major economies as expectations of interest rate cuts are being pared.

“In India, conditions are shaping up for an extension of a trend upshift in real GDP growth, backed by strong investment demand and upbeat business and consumer sentiments,” the article said.

The RBI, however, said the views expressed in the Bulletin article are of the authors and do not represent the views of the Reserve Bank of India.