Rupee jumps 56 paise to 95.18 vs US dollar after RBI announces forex-support measures

The rupee strengthened sharply on Friday, rising 56 paise to close at 95.18 against the US dollar after the Reserve Bank of India announced a series of measures aimed at attracting foreign capital and boosting foreign exchange liquidity, PTI reported.Forex traders said the RBI's policy announcements improved investor sentiment after the central bank asserted that India's foreign exchange reserves remain adequate to cushion the economy against external shocks.At the interbank foreign exchange market, the rupee opened at 95.72 against the greenback, touched an intraday high of 94.89 and eventually settled at 95.18, up 56 paise from Thursday's close.The domestic currency had ended 2 paise higher at 95.74 against the US dollar in the previous session.The RBI on Friday kept the repo rate unchanged at 5.25% for the second consecutive policy review while maintaining a neutral stance, as policymakers assessed the impact of elevated energy prices and supply disruptions arising from the West Asia crisis.Announcing the monetary policy decision, RBI Governor Sanjay Malhotra said the Monetary Policy Committee (MPC) unanimously voted to retain the benchmark lending rate at 5.25%."By holding the repo rate at 5.25 per cent with a neutral stance even while raising the FY27 inflation forecast by 50 basis points to 5.1 per cent, the RBI has drawn a clean line: the rate instrument is reserved for inflation, and the rupee will be defended through the capital account," said Anindya Banerjee, Head of Commodity and Currency Research at Kotak Securities.Banerjee said the expansion of the Fully Accessible Route to all new 15-, 30- and 40-year government security issuances, removal of foreign portfolio investor concentration limits, extension of FCNR(B) hedging support, the PSU ECB swap window and restoration of the export realisation period to nine months together amount to the most comprehensive dollar mobilisation effort since 2013."The Centre's simultaneous removal of taxes on foreign investment in G-Secs is the force multiplier, as it addresses the single biggest friction flagged by global bond funds and index providers," he said."We see this as constructive for the long end of the G-Sec curve. On the currency, these measures can aid the rupee's appreciation over the near term, provided oil prices stay below USD 100 a barrel."We see scope for the rupee to appreciate towards 94 to 94.5 on spot over the near term, with the upside in USD-INR now capped around the 96 mark. Any appreciation beyond 94 would depend on the actual quantum of dollar mobilisation through these newly announced routes and the trajectory of oil prices," Banerjee added.According to Dilip Parmar, Research Analyst at HDFC Securities, the rupee recorded its strongest single-day gain since April 2."A softening greenback and declining crude oil prices provided additional tailwinds. Looking ahead, a decisive break past 94.70 is expected to pave the way for the rupee to march toward 94.10 in the short term," Parmar said.The RBI governor said India's forex reserves stood at a healthy $682.3 billion, sufficient to provide import cover for around 11 months.Meanwhile, the dollar index, which measures the US currency's strength against a basket of six major currencies, was trading 0.19% lower at 99.22.Brent crude, the global oil benchmark, fell 0.29% to $94.75 per barrel in futures trade.On the domestic equity front, the Sensex declined 116.67 points to close at 74,243.34, while the Nifty fell 49.85 points to 23,366.70.Foreign institutional investors sold equities worth Rs 8,776.25 crore on a net basis during the session, according to exchange data.The RBI also revised its FY27 GDP growth forecast down to 6.6% from 6.9% and raised its CPI inflation projection to 5.1% from 4.6%.Separately, government data released on Friday showed India's economy expanded 7.8% in the January-March quarter, supported by strong domestic demand and government spending. The growth rate compared with 7% in the year-ago period and 8% in the preceding quarter.The January-March quarter captured only one month of disruptions linked to the Iran conflict. The full impact of higher oil prices and supply disruptions from the Middle East, a key source of India's crude oil, natural gas and LPG imports, is expected to be reflected in the April-June quarter.