Rupee opens 13 paise up against dollar at 89.85 ahead of RBI's monetary policy

Indian rupee

The rupee opened stronger on December 5 ahead of the Reserve Bank of India's (RBI) monetary policy decision.

The currency opened at 89.85 against the US dollar, up 13 paise from previous day’s close of 89.98.

The RBI’s monetary policy committee is likely to cut repo rate by 25 basis points (bps) due to the comfort provided by the lowest ever Consumer Price Index (CPI) inflation in the past two months, A Moneycontrol poll of economists, treasury heads and fund managers found.

"With the rupee already under pressure, a rate cut would widen the interest-rate differential, risk triggering more outflows and accelerate INR depreciation," Kunal Sodhani, head of treasury at Shinhan Bank said.

On December 4, the rupee closed below 90-mark on likely intervention by the RBI after falling to a new low earlier in the day, currency traders said.

The rupee hit a fresh record low, extending its break below the closely watched 90-per-dollar level, as uncertainty over US trade deal continued to erode sentiment.

The currency's sharp undervaluation historically tends to attract foreign investors back into local assets, suggesting further downside may be limited, analysts said.

"We expect rupee to trade in the 89.80-90.20 range with sideways price action," said Abhishek Goenka, founder & CEO of India Forex Asset Management-IFA Global.