The USD/INR gains some more after the Reserve Bank of India's policy decision where no interest rate cut was delivered, disappointing traders who bought into the local currency early Monday. The pair was last quoted at 54.01, still below the late Friday level of 54.30. The pair traded between a four-month low of 53.66 and 54.14 so far this session. It wasn't surprising that RBI maintained status-quo on policy rates and provided a token 25-bp cut in the cash reserve ratio, says Moses Harding, head of economic research at IndusInd Bank. "It was a balancing act with one eye on inflation and the other on government's action to address policy paralysis and fiscal consolidation," he adds. Confidence on the INR has improved significantly after QE3 and bold actions from policy-makers. Despite the easier global liquidity fuelling asset price increase, the risk factor from higher commodity prices may not hurt India's balance of payment position, Harding says.
He tips the USD/INR to trade in 53.99-54.17 for the rest of the day; and fall to 53-52 in the short-term.
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