The rupee extended its recovery on Friday, climbing 9 paise to 89.80 against the US dollar in early trade, ahead of the much awaited the Reserve Bank of India’s monetary policy announcement.The bounce back comes after a highly volatile week in the currency market, during which rupee repeatedly slipped to new lows.Earlier on Thursday, the currency opened at 90.36 at the interbank foreign exchange market. However, it later reversed the course, ending the day at 89.89 against the greenback, appreciating by 26 paise. The rise was supported by weakness in the US dollar index and reports of intervention by the central bank. Thursday’s turnaround followed another milestone on Wednesday, when the currency breached the 90-per-dollar mark for the first time and closed at 90.15. The fall came due to selling pressure from foreign investors, a rise in crude oil prices and uncertainty linked to the delayed India–US trade deal. Despite the steep decline earlier this week, Chief Economic Adviser V Anantha Nageswaran said on Wednesday that the currency’s depreciation is not impacting inflation or exports. According to him, a weaker rupee can aid outward shipments while making imports costlier. He noted that sectors with heavy import requirements, including gems and jewellery, petroleum and electronics, may face pressure if input costs continue rising, which could affect inflation expectations.Now, all eyes are on RBI’s announcement expected at 10:00 AM on Friday, which will impact how the currency will be headed in the future.Dr VK Vijayakumar, Chief Investment Strategist, Geojit Investments Limited said, “Rupee’s sharp recovery yesterday to 89.97 from the low of 90.42 is signalling some sort of stability in the currency market. The RBI governor’s views on the rupee today will significantly influence the near-term direction of the currency.”Meanwhile, Naveen Mathur, director – commodities & currencies at Anand Rathi Shares and Stock Brokers said that the apex bank may be tempted to hold the rate steady this time, “due to higher concerns of rupee depreciation.” “More importantly, markets are looking for cues on the progress in US-India trade deal which could only provide major relief to the rupee in medium to long term perspective. On the higher side a breach and successful close above 90.70 could lead the pair to test next levels at around 91.40 – 91.50 on weekly basis,” the expert added.
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