Rupee Seen Steady Ahead of RBI Policy as Dollar Inflow Measures in Focus

The Indian rupee is likely to open largely unchanged on Friday, with its intraday movement expected to be influenced by the central bank’s policy decision, including any rate action and measures aimed at boosting dollar inflows.

In the NDF market, the Indian rupee is trading at 95.75-95.80 range, after closing 95.7850 on Thursday.

Attention is now focused on the Reserve Bank of India’s policy announcement, scheduled for 10:00 am IST. While most economists anticipate the RBI will leave interest rates unchanged, currency traders remain divided on the likely outcome.

In recent weeks, several reports have suggested that policymakers are considering measures to encourage dollar inflows. The latest indicates that India may eliminate capital gains tax on foreign portfolio investments in government securities, a step that could help attract overseas funds.

Expectations of measures to attract dollar inflows come amid growing external challenges. Economists caution that sustained high oil prices could widen the current account deficit, especially as portfolio inflows are likely to remain subdued.

Meanwhile, regional cues remained unfavorable for the rupee, with most Asian currencies trading lower and investor risk appetite staying muted. Market sentiment was weighed down by concerns over escalating tensions in the Middle East, while uncertainty persisted around U.S.-Iran negotiations.

Oil prices were largely unchanged on Friday at $94.54 per barrel after posting steep losses in the previous session, as hopes for a near-term resolution to the U.S.-Israeli conflict with Iran faded following Hezbollah’s rejection of a new ceasefire proposal in Lebanon.

The Indian benchmark indices, BSE Sensex and Nifty 50, are expected to open slightly lower on Friday, reflecting muted cues from the GIFT Nifty.

GIFT Nifty was trading slightly lower at around 23,502, indicating a muted to negative opening for the Indian equity markets.

Foreign Institutional Investors (FIIs) extended their selling streak for a seventh straight session on Thursday, divesting equities worth ?4,447 crore.