- India Inc hails RBI decision not to hike repo rateRaghuram Rajan pulls repo rate surprise, says headline inflation dictated RBI stanceRaghuram Rajan: Economic growth expected to improve in second half of 2013-14Inflation: RBI Guv Raghuram Rajan says vegetable prices falling sharply, but warns of profiteers depriving consumers
The Indian rupee surrendered initial gains and fell for the second day, losing eight paise to 62.09 against the US dollar today as concerns about the US Federal Reserve tapering its stimulus programme outweighed RBI Governor Raghuram Rajan's surprise status quo decision on interest rates.
Demand from importers for the dollar, which strengthened overseas, also put pressure on the Indian rupee, while sustained capital inflows restricted the fall.
The Indian rupee opened strong at 61.90 a US dollar from the previous close of 62.01 at the interbank foreign exchange market. It climbed to 61.77 on a smart rebound in domestic stocks after the central bank unexpectedly kept all key policy rates unchanged in its Mid-Quarter Monetary Policy Review.
The RBI left the key repo rate at 7.75 per cent and the cash reserve ratio at 4 per cent. Analysts had expected a 25 bps increase in the repo rate after both retail and wholesale inflation remained high in November.
However, the Indian rupee fell on dollar demand from importers to a low of 62.18 before ending at 62.09, a loss of eight paise or 0.13 per cent.
"Rupee was immediately seen appreciating (after RBI policy) but it was a short-lived impact. Later in the session, rupee was seen weakening ahead of the next important event of the day - the Fed's decision on quantitative easing, which will decide the further direction of the market," said Abhishek Goenka, CEO of India Forex Advisors.
The 30-share benchmark Sensex rose 247.72 points, or 1.2 per cent, after six straight days of losses. Foreign institutional investors bought shares worth a net Rs 249.93 crore yesterday, according to provisional data.
The US dollar index was up 0.07 per cent ahead of the outcome of the US Federal Reserve meeting later today on the future of stimulus measures.
Forward dollar premiums declined on fresh receipts by exporters. The benchmark six-month forward dollar premium payable in May moved down to 243-245 paise from 245-247 paise previously and far-forward contracts maturing in November also closed lower at 486-1/2 to 488-1/2 paise from 490 to 492-1/2 paise.
The RBI fixed the reference rate for the dollar at