The Rupee witnessed high volatility and slipped towards 71 level after the Reserve Bank of India on August 7 cut key interest rate by 35 basis points to boost the slowing economy.
The Rupee had opened on a weak note at 70.92 at the interbank Forex market, then fell further to 70.99 against the U.S. Dollar. The domestic currency was trading at 70.91 at 1215 hrs, down 10 paise over its last close.
Following the RBI’s Monetary Policy Committee (MPC) decision, the local currency witnessed heavy volatility. It fell to a low of 70.99 and a high of 70.88 within minutes of RBI policy decision.
The domestic unit had settled at 70.81 against the U.S. Dollar on August 6.
The Reserve Bank on August 7 cut key interest rate for the fourth consecutive time, as it reduced repo rate by 35 basis points to 5.40% to boost the slowing economy.
Escalating trade tensions
The six-member monetary policy committee (MPC) also maintained the ‘accommodative stance’ on the monetary policy. Noting that inflation is currently projected to remain within the target over a 12-month ahead horizon, the MPC said since the last (June) policy, domestic economic activity continues to be weak, with the global slowdown and escalating trade tensions posing downside risks.
The RBI also revised real GDP growth for 2019-20 downwards to 6.9% from 7 % in the June policy. Meanwhile, brent crude futures, the global oil benchmark, fell 0.29% to $58.77 per barrel, as U.S.-China trade dispute rattled investor sentiments.
Foreign institutional investors (FIIs) remained net sellers in the capital markets, pulling out ₹2,107.93 crore on Tuesday, as per provisional data.
Domestic bourses also witnessed heavy volatility and was trading higher by 46.61 points or 0.13% at 37,023.46 and Nifty was trading at 10,951.50, up 3.25 points or 0.03%.
Meanwhile, on the global front investors fretted as dispute between tow of the world’s largest economies intensified over tariffs and currency.
China has meanwhile reported to have said that it is halting new purchases of U.S. agricultural products after President Trump vowed last week to impose new tariffs on Chinese goods starting in September.