By Anushka Trivedi
MUMBAI, April 6 (Reuters) - The Indian rupee held minor
gains and forward premiums fell on Thursday after the Reserve
Bank of India surprised markets by holding rates, with the local
currency posting its third straight weekly advance.
The rupee finished at 81.8850 per dollar, compared
with its previous close of 82. It gained about 0.34% in the
holiday-shortened week. India's financial markets will be closed
on Good Friday.
The currency recovered from a small dip to 82.0525
immediately after the RBI held its key repo rate at 6.50%,
citing risks to growth amid the recent global financial turmoil.
Most analysts had expected a seventh straight and final rate
hike, of 25 basis points (bps), at this meeting.
"We see this as a temporary setback for the rupee," Standard
Chartered analysts said in a note.
"Given the improvement in India's trade balance and broad
dollar weakness, we see rising downside risks to USD/INR in the
near term."
The dollar index is trading near two-month lows on
expectations that the Federal Reserve is near the end of its
monetary tightening campaign after a batch of soft data.
However, the Indian central bank did keep its stance at
"withdrawal of accommodation" to remain cautious in the face of
elevated core inflation. Governor Shaktikanta Das said the pause
was "for this meeting only".
Das also stressed on maintaining the rupee's stability and
announced a measure to deepen forex markets by proposing to
permit banks with IFSC banking units to offer non-deliverable
derivative contracts involving the rupee to resident users in
the onshore market.
The USD/INR 1-year annualised forward premium yield tumbled to 2.47%, from 2.60% ahead of the policy
decision. India's benchmark bond yield declined 7
bps to 7.2091%. While most markets will be shut on Good Friday, traders will
watch out for U.S. non-farm payrolls report due later that day.
(Reporting by Anushka Trivedi; Editing by Savio D'Souza)
anushka.trivedi.thomsonreuters.com@reuters.net))
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