Rupee Ends Lower at 96.30, RBI Policy Decision, Foreign Flows in Focus

The rupee ended 5 paise lower at 96.30 (provisional) against the US dollar on Monday, remaining under pressure from elevated crude oil prices and persistent foreign fund outflows, even as improved risk sentiment and likely RBI intervention helped limit losses.

The domestic currency opened at 96.20 and slipped to an intraday low of 96.31 against the greenback before settling at 96.30, compared with 96.25 on Thursday. Forex and equity markets were closed on Friday on account of Mahatma Gandhi Jayanti.

The rupee had fallen below the psychologically important 96-per-dollar mark last week and has remained range-bound around that level amid a stronger dollar and high oil prices.

"Improving risk-on sentiment provided an additional cushion for the local currency, though all eyes will now be on the RBI's monetary policy decision and foreign capital flows," said Dilip Parmar, Research Analyst at HDFC Securities.

He expects the USD/INR pair to consolidate between 95.95 and 96.50 in the near term, with a bias towards further gains. The Reserve Bank's Monetary Policy Committee began its three-day meeting on Monday, with markets widely expecting a 25-basis-point rate hike to 5.50 per cent. The policy decision is due on Wednesday.

Meanwhile, the dollar index was trading 0.25 per cent higher at 102.18, while Brent crude, the global oil benchmark, rose 0.22 per cent to USD 102.48 a barrel in futures trade. Elevated oil prices remain a concern for the rupee as India relies heavily on energy imports.

Foreign fund outflows have also weighed on the currency. Foreign Institutional Investors offloaded equities worth Rs 9,484.22 crore on a net basis on Thursday, according to exchange data. India's forex reserves fell USD 18.343 billion to USD 747.557 billion in the week ended September 25, following a decline of USD 14.881 billion in the previous week.

Domestic equities, however, ended higher, with the Sensex gaining 472.77 points to 72,382.47 and the Nifty rising 133.80 points to 22,555.75. The rupee's near-term trajectory will depend on foreign capital flows, crude prices, global dollar movements and the RBI's policy guidance.