Rupee Rises 13 Paise as RBI Surprises with Aggressive Rate Cut and Liquidity Boost

Mumbai, June 6 – The Indian rupee appreciated 13 paise to 85.66 against the US dollar in early trade on Friday, buoyed by a sharper-than-expected rate cut by the Reserve Bank of India (RBI) aimed at spurring economic growth.

RBI’s Bold Policy Push Lifts Sentiment

The Reserve Bank of India announced a 50 basis point cut in the repo rate, bringing it down to 5.5%, surprising the markets with a more aggressive stance than anticipated. The move is part of a broader strategy to support growth, especially as the central bank also unveiled a 100 basis point reduction in the Cash Reserve Ratio (CRR) over the year. This CRR cut is expected to infuse ₹2.5 lakh crore of liquidity into the banking system, facilitating increased credit flow to productive sectors.

The Monetary Policy Committee (MPC) maintained its GDP growth forecast for FY26 at 6.5%, while targeting inflation at 3.7%. Forex traders noted that the all-encompassing approach of the policy has improved investor confidence and strengthened the rupee.

Volatile Start Ends on a Positive Note

At the interbank foreign exchange market, the rupee opened weak at 85.91, down 12 paise from its previous close. However, it quickly reversed the losses and climbed to an intraday high of 85.66 against the greenback.

On Thursday, the rupee had ended its two-day losing streak, closing 8 paise higher at 85.79.

Global and Domestic Market Cues

The broader market also responded positively to the RBI’s policy announcements. The BSE Sensex surged 747.11 points (0.92%) to 82,189.15, while the NSE Nifty climbed 244.70 points (0.99%) to 24,995.80.

In global markets, the US dollar index edged up by 0.07% to 98.81, while Brent crude slipped 0.52% to $65.00 per barrel, easing concerns about imported inflation.

Meanwhile, foreign institutional investors (FIIs) were net sellers on Thursday, offloading equities worth ₹208.47 crore, according to exchange data.

Outlook

The RBI’s proactive policy stance has injected optimism into both the currency and equity markets. By addressing both growth and liquidity in tandem, the central bank has set a positive tone for the coming quarters, potentially leading to a more stable rupee and continued investor interest.

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