MUMBAI: The Indian rupee is expected to linger near a lifetime low at the open on Friday before the central bank most likely cuts interest rates to support sluggish economic growth.
The 1-month non-deliverable forward indicated that the rupee will barely change from 87.5775 on Thursday and near the all-time low of 87.5825.
Nearly three-fourths of the economists polled by Reuters expect the Reserve Bank of India to cut the policy rate for the first time in half a decade amid a dip in the Asian nation’s growth rate.
A few economists expect the RBI to take more measures to boost liquidity in addition to reducing borrowing costs.
The rate decision is due at 10.00 a.m. IST.
The rupee has been struggling ahead of the policy decision, down more than 1% so far this week.
This is despite the postponement of U.S. tariffs on Canada and Mexico and the measured response by China to U.S. tariffs helping other Asian currencies recover.
It is “quite evident” that there is “market nervousness” before RBI’s policy, which has led to a pick up in hedging against the rupee’s decline, a currency trader at a bank said.
It seems that the rupee has already priced in “a lot of negatives” and the bar for a further decline based on policy will be high, the trader said.
Indian rupee hits record low, central bank likely steps in as bearish bias persists
In contrast to the rupee decline this week, the offshore Chinese yuan and the Korean won are up 0.4%.
US jobs data
The January U.S. jobs report due later in the day will provide investors cues on the outlook for U.S. interest rates.
The data follows a fairly hawkish Federal Reserve policy meeting last week at which it hinted it is in no hurry to cut interest rates.
American Dollar Exchange Rate