New Delhi, June 5: The Indian rupee showed strength against the US dollar on Friday, following the Reserve Bank of India’s (RBI) announcement of relaxed investment rules for foreign portfolio investors (FPIs). This move aims to enhance capital inflow into the country.
The domestic currency opened at 95.72 in the interbank foreign exchange market and strengthened by 50 paise during the day, reaching 95.24 per dollar. In the previous trading session, the rupee had closed at 95.74 per dollar.
This significant appreciation of the rupee comes as the RBI maintained interest rates in its second consecutive monetary policy meeting. The central bank also announced several measures to boost investment flow and market confidence.
During the announcement of the bi-monthly monetary policy for the fiscal year 2026-27, RBI Governor Sanjay Malhotra stated that the Monetary Policy Committee (MPC) unanimously decided to keep the repo rate unchanged at 5.25 percent, while also maintaining a neutral policy stance.
The central bank has increased the investment limit for non-resident Indians (NRIs) and overseas citizens of Indian origin (OCI) in equity instruments. Additionally, the rules governing investments by foreign portfolio investors in government securities have been simplified.
Governor Malhotra reiterated that there has been no change in the RBI’s exchange rate policy, and the central bank does not target any specific level or range for the rupee. He emphasized that the exchange rate should be determined by market forces.
Experts believe that the expansion of the Fully Accessible Route (FAR) for bonds, relaxation of FPI debt investment rules, temporary FCNR(B) deposit facility, and discounted foreign exchange swaps will support the domestic currency and help increase dollar inflows.
They assert that these measures will strengthen foreign investors’ confidence and attract investment into Indian markets.
However, experts noted that while the RBI acknowledged the risks associated with high crude oil prices and raised inflation forecasts, the central bank’s reassuring message regarding its robust foreign exchange reserves of approximately $682 billion has positively influenced market sentiment.
Meanwhile, global crude oil prices remain elevated. International benchmark Brent crude was trading around $95.37 per barrel, up nearly 1 percent.
The RBI has also revised its macroeconomic projections. The central bank lowered its GDP growth forecast for the fiscal year 2026-27 from 6.9 percent to 6.6 percent, while raising the Consumer Price Index (CPI)-based inflation estimate from 4.6 percent to 5.1 percent.
Leave a Comment