The Indian rupee ended little changed following a rangebound trading session on Thursday, with market players speculating whether the country’s central bank will initiate an interest rate easing cycle on Friday to stimulate economic growth.
The rupee, ended at 84.7325 to the U.S. dollar, from Wednesday’s close of 84.74.
The domestic unit traded with a slight upside bias during Thursday’s session, tracking similar moves in Asian peers on growing expectations that the U.S. Federal Reserve will lower rates this month.
The rupee hit an all-time low of 84.7575 on Tuesday, weighed down by a slowdown in India’s growth in the July-September quarter, and uncertainty over the impact of U.S. President-elect Donald Trump’s policies on emerging market currencies.
A majority of economists expect the Reserve Bank of India to keep interest rates on hold on Friday, retaining its focus on bringing inflation down even as global market volatility left other major central banks poised to ease policy.
A handful, however, reckon that recent growth data will prompt the RBI to cut rates.
Without signs of growth stability, pressure on the external sector will continue, Nomura economists said in a note, adding that the rupee’s recent weakness will not deter the RBI from cutting rates.
If there is no rate cut but a reduction in the Cash Reserve Ratio (CRR), which seems likely at this point, then that could provide some temporary relief to the rupee, said Jigar Trivedi, a senior analyst at Reliance Securities.
Trivedi pegs the rupee in an 84.80 to 85.00 range through December.
The RBI’s rate decision will be followed by the U.S. November monthly jobs report on Friday.
The non-farm payrolls report will provide cues on whether the Fed will lower rates at its Dec. 17-18 meeting. Currently, the odds are heavily in favour of the Fed cutting rates by 25 basis points.
