The rupee was trading higher on Thursday after a surge in the foreign exchange market and the foreign-exchange depreciation.
The rupees have strengthened as a result of rising interest rates.
The Reserve Bank of India (RBI) on Wednesday raised the benchmark rate by a quarter of a percentage point to 7.75%.
The central bank also raised its benchmark interest rate by 0.25 percentage point.
Analysts said that the RBI is likely to hike the interest rate again in coming days.
A weaker rupee would be good news for exporters of gold, which would also help ease inflationary pressures, said Arvind Subramanian, chief economist at BNP Paribas.
“Inflationary pressures in the country are already low.
This would help ease them.
Inflationary pressure is low because of a low growth rate and weak economic activity.
It is expected to fall in the near term as the economy picks up and exporters start getting more money.
Investors also saw a strong rupee as the government kept its fiscal stance on track and cut the spending to curb the inflation.
On Thursday, the rupees fell to a six-month low of 64.30 per dollar.
The RBI cut the benchmark interest rates for the first time in two years on Thursday.
The move is expected after it took action on the government’s fiscal deficit target, the currency’s official turnover, and the government expenditure ratio, among other measures.
Subramanian said that this will help boost the ruabs foreign exchange reserves.
The currency is currently trading at 77.40 per dollar in the open market.
For the first three months of fiscal 2017, the RBI kept its benchmark rates at 7.5 per cent and 3 per cent.
RBI Governor Raghuram Rajan earlier said that its move is likely at a time when the economy is not looking good and there is a lot of uncertainty around the economy.
However, the Reserve Bank said that it will continue to take all necessary measures to ensure inflation does not increase.
In the first quarter of fiscal 2018, the central bank said it would hold interest rates at 4.25 per cent for three years.
Economists at Standard Chartered said that as a reminder, the RBI cut its benchmark rate twice this year and also this year, and the rate will remain unchanged in 2019.
This is the first monetary policy move by the RBI.
Source: The Times Of India