The Indian rupee saw a significant rise against the US dollar following the Reserve Bank of India’s decision to relax investment rules for foreign portfolio investors. It surged by 50 paise to 95.24 against the dollar during intraday trade, starting at 95.72 in the interbank foreign exchange market. This increase came after the RBI maintained policy rates unchanged and introduced measures to enhance capital flows and market confidence amidst global uncertainties.
The RBI, in its second bi-monthly monetary policy of FY27, announced the retention of the repo rate at 5.25 percent with a neutral policy stance. Additionally, the central bank raised investment limits for Non-Resident Indians (NRIs) and Overseas Citizens of India (OCIs) in equity instruments and relaxed FPI investment regulations in government securities. Governor Sanjay Malhotra emphasized that the RBI’s exchange rate policy remains unaltered, with no specific target level or trading band for the rupee.
Experts anticipate that initiatives like expanding the Fully Accessible Route (FAR) for bonds, easing FPI debt investment norms, introducing a temporary FCNR(B) deposit window, and providing concessional foreign exchange swap facilities will bolster the domestic currency and enhance dollar inflows. Despite acknowledging risks from high crude oil prices and revising inflation projections upwards, the RBI’s affirmation of sufficient forex reserves, currently standing at around $682 billion, has instilled confidence in the market.
Furthermore, global crude oil prices remained elevated, with Brent crude trading nearly 1 percent higher at $95.37 per barrel in futures trade. The RBI also adjusted its macroeconomic forecasts, lowering FY27 GDP growth estimates to 6.6 percent from the previous 6.9 percent and increasing CPI inflation projections to 5.1 percent from 4.6 percent.
