The rupee on Tuesday ended below the psychologically important 67-mark in a nervous trading session amid uncertainty over the monetary policy action by two leading central banks and foreign currency non-resident (FCNR) redemptions.
The currency lost five paise to settle at 67.01 against the American currency while the sentiment across the globe was relatively muted and traded cautiously ahead of highly-anticipated monetary policy decisions by the US Federal Reserve and Bank of Japan. Both the major central banks are scheduled to announce their respective monetary policy decision on Wednesday.
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The rupee largely traded in a tight range of 66.94 and 67.07 throughout the day given traders’ hesitancy to take any risk ahead of the major central banks meetings before finally ending at 67.01, showing a small loss of 5 paise, or 0.07 per cent.
According to Pranjul Bhandari, chief India economist, HSBC Global Research, India is likely to experience foreign currency non-resident deposit (FCNR) outflows during the September to December period, and counterparty risk could cause some stress in up to three markets — US dollar liquidity, Indian rupee liquidity and banking sector statutory liquidity. When the RBI tries to calm one market, stress could unintentionally spill over into another market, Bhandari said.
Meanwhile, stock markets fell on Tuesday, snapping a four-day rally, as investors remained cautious ahead of policy meetings of the US Fed and the Bank of Japan later this week. The BSE Sensex fell 111.30 points or 0.39 per cent to 28,523.20. The broader NSE index closed 32.5 points or 0.37 per cent down at 8,775.90. Among BSE sectoral indices, realty index fell the most by 1.94 per cent and power 0.75 per cent.