Rupee vs Dollar Update: Rupee strengthened by 20 paise against the dollar, recovering from its lowest level, know the reason…

Rupee vs Dollar Update: In early trade on Friday (December 5), the rupee strengthened by 20 paise to reach 89.69 against the US dollar. The rupee was also under pressure due to selling pressure by foreign investors, rising crude oil prices and delay in the announcement of India-US trade agreement.

At the interbank foreign exchange market, the rupee opened at 89.85 against the US dollar and touched 89.69 in morning trade, showing a rise of 20 paise over its previous close. On Thursday (December 4), the rupee recovered from its lowest level and closed at 89.89 against the dollar, rising by 26 paise.

RBI today cut interest rates by 0.25%. The repo rate has been reduced by 0.25% to 5.25%. This decision to cut rates was taken unanimously by the MPC members.

The Monetary Policy Committee of the Reserve Bank of India on December 5 cut its inflation forecast for the financial year ending March 2026 to 2.0% from 2.6%, noting that price pressures at the beginning of the year were much lower than expected.

“Headline and core inflation are expected to remain at or below 4% in the first half of FY27,” RBI Governor Sanjay Malhotra said in his policy address. Malhotra further said that the modest inflation of 2.2% and GDP growth of 8% in the first half is a rare Goldilocks period. This step of RBI was largely as per expectations.

As of November 28, foreign exchange reserves stood at $686 billion. Foreign exchange reserves cover 11 months of imports. He said that gross FDI remained strong in the first half. Global oil benchmark Brent crude fell 0.21% to $63.12 per barrel in futures trade. In the domestic equity market, Sensex rose 53.54 points to 85,318.86 in early trade, while Nifty rose 28.2 points to 26,061.95. According to exchange data, foreign institutional investors sold shares worth ₹1,944.19 crore on a net basis on Thursday.

Commenting on the RBI policy, Geojit Investments’ V.K. Vijayakumar said that the MPC decided to vote in favor of growth despite the strong growth momentum in the economy. The decision to cut rates by 25 bps reflects a consensus within the MPC that boosting growth further despite the rupee’s depreciation is a risk worth taking.

The estimate of 7.3% GDP growth for FY26 is positive for the market. Overall, banks will appreciate this policy decision but are unlikely to react very positively to the rate cut as it will put pressure on their NIMs and they will find it difficult to mobilize deposits if deposit rates are reduced. However, rate-sensitive companies like auto and real estate may benefit from the rate cut.

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