Rupee closes flat; RBI rate decision holds key

Written by Reuters | Mumbai | Updated: Oct 26 2013, 16:17pm hrs
The rupee ended flat on Friday, but extended losses for a second week, as caution set in ahead of an expected interest rate hike by the central bank at its policy review next week.

The RBI is expected to raise its key repo rate by 25 bps on Tuesday its second consecutive monthly hike as it tries to tackle rising inflationary pressures, a Reu-ters poll showed. However, in a bid to further ease funding costs, the bank is also expected to further ease the marginal standing facility rate by 25 bps, the poll showed.

An interest rate hike could nonetheless dent sentiment by raising concerns about an economy already growing at its slowest pace in a decade. "The RBI has various options on the policy. However, a hike in the repo rate will be a dampener for the rupee," said Hari Chandramgethen, chief forex dealer at South Indian Bank.

The rupee closed at 61.46/47 per dollar, unchan-ged from its Thursday's close. For the week, the currency ended down 0.3%.