Rupee ends flat at 70.88 against $ after RBI rate cut

MUMBAI: The rupee on Friday closed almost flat at 70.88 against the US dollar after the Reserve Bank of India in a widely expected move cut key interest rates by 0.25 percentage point. At the interbank foreign exchange market, the rupee had opened strong at 70.82 against the US dollar at the interbank forex market.

During the day, the domestic unit fluctuated between a high of 70.78 and a low of 71.03. The rupee finally settled at 70.88, down 1 paise over its previous close.

On a weekly basis, the local unit slumped by 32 paise.

The Reserve Bank on Friday cut its benchmark lending rate by 0.25 percentage point to revive economic growth and affirmed commitment to remain accommodative to address growth concerns 'as long as necessary'.

"Overall the policy was in line with market expectations and it did not have any major impact on the rupee," said Rahul Gupta, Currency Head Research, Emkay Global Financial Services.

Gupta further said that "the only surprise factor was a sharp cut in FY20 GDP to 6.1 per cent from 6.9 per cent as local economic activity has weakened along with a slowdown in the global economy and lingering geopolitical tensions".

In the fourth bi-monthly review of the policy, the RBI sharply reduced its GDP growth estimate to 6.1 per cent for FY20 as against 6.9 per cent it was expecting earlier.

This cut came in the wake of June quarter growth slipping to a six-year low of 5 per cent, which is attributed to a slowdown in consumption, lack of new investments by the industry and also a slump in the global economy.

Forex traders said markets had discounted the rate cuts. Moreover, foreign fund outflows, heavy selling in domestic equities and rising crude oil prices also kept pressure on the Indian rupee.

"Going forward we are not expecting USDINR to fall below 70.50. hence the range for next week will be 70.6571.35," Gupta added.