Rupee recovers 26 paise from all-time low level to 87.33 against US dollar

The rupee recovered 26 paise from an all-time low closing level to 87.33 against the US dollar on Friday and was later trading at 87.45 against the greenback after the Reserve Bank reduced the repo rate by 25 basis points.

At the interbank foreign exchange, the rupee opened at 87.57, it touched an intraday high of 87.33 and a low of 87.57 against the greenback in morning trade. It was trading at 87.45 against the US dollar at 1213 hrs.

Forex traders said it was widely anticipated that the Reserve Bank of India (RBI) will deliver a rate cut and hence the market has not reacted much to the rate cuts.

The RBI under new Governor Sanjay Malhotra on Friday cut the key interest rate for the first time in nearly five years.

The interest rate cut comes within a week of Finance Minister Nirmala Sitharaman in Budget 2025-26 providing the biggest-ever tax break to the middle class to boost consumption after the economy has slowed to its lowest pace since the pandemic.

On Thursday, the rupee plunged 16 paise to close at an all-time low of 87.59 against the US dollar.

The Monetary Policy Committee (MPC) unanimously decided to slash the policy rate by 25 basis points to 6.25%, Malhotra said.

Reserve Bank Governor Sanjay Malhotra on Friday said that the exchange rate policy has remained consistent over the years and the central bank does not target any 'specific level or band' of the rupee, which slipped to an all-time low of 87.59 to the US dollar.

"I would like to mention here that the Reserve Bank’s exchange rate policy has remained consistent over the years. Our stated objective is to maintain orderliness and stability, without compromising market efficiency," he said while unveiling the outcome of the Monetary Policy Committee meeting.

While a rate cut could help ease some of the pressure by improving liquidity and attracting foreign investments, it would also lead to an increase in rupee supply, which could further weaken the currency and exacerbate depreciation pressures, forex traders said.

As on January 31, this year, India’s foreign exchange reserves stood at $630.6 billion, up from $629.55 billion in the preceding week, providing an import cover of over 10 months.

Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.07% higher at 107.76.

Brent crude, the global oil benchmark, rose 0.54% to $74.69 per barrel in futures trade.

In the domestic equity market, the 30-share BSE Sensex was trading 81.24 points, or 0.10%, higher at 78,139.40 points, while the Nifty was up 42.35 points, or 0.18%, at 23,645.70 points.

Foreign institutional investors (FIIs) offloaded equities worth ₹3,549.95 crore in the capital markets on a net basis on Thursday, according to exchange data.