Rupee opened 11 paise higher on February 7 ahead of Reserve Bank of India's (RBI) monetary policy announcement.
The local currency opened at 87.4688 against the US dollar, as compared to 87.5788 at previous close against the greenback.
The RBI will deliver it's decision on interest rate at 10 AM today, where it is widely expected that the central bank will cut rates by 25 basis points (Bps).
On February 3, Moneycontrol poll of economists and treasury heads across banks and market experts, hint that a brand new monetary policy committee that met from February 4 - 7, led by the new governor Sanjay Malhotra, may hand out a rate cut in the upcoming Monetary Policy of Reserve Bank of India.
Being the first MPC under Malhotra, the expectation is that the repo rate cut or the benchmark lending rate fixed by the RBI could be reduced by 25 basis points (bps) from 6.5 percent to 6.25 percent in the upcoming MPC. The MPC will announce its decision on repo rate on February 7.
Amit Pabari, managing director at CR Forex Advisors said that as long as liquidity deficit persists, the rupee will remain under pressure. Additionally, the CRR cut is further weighing on the rupee.
"With current headwinds surpassing tailwinds and compounded by the RBI's rate cut expectations, the rupee is expected to trade at elevated levels between 87.20 and 87.70, with 87.20 acting as a support level."
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