Rupee Gains as RBI's Surprise Rate Cut Sparks Optimism

The Indian rupee appreciated by 11 paise to 85.68 against the US dollar following a surprise 50 basis points rate cut by the Reserve Bank of India. The central bank's move aims to stimulate economic growth, with domestic markets reacting positively despite a volatile trading day.

The Indian rupee ended Friday on a stronger note, climbing by 11 paise to 85.68 against the US dollar. This appreciation followed the Reserve Bank of India's unexpected 50 basis points cut in the repo rate, a move intended to bolster economic growth.

Forex traders noted that the RBI's rate cut, coupled with a phased reduction of 100 basis points in the cash reserve ratio, was a significant factor in lowering borrowing costs and fostering market optimism. This led to gains in domestic markets, with indices closing over 1 percent higher.

Despite initial volatility, which saw the rupee opening lower at 85.91, the currency rallied, driven by the RBI's decisive action. However, experts indicate that the strengthening dollar index and weakening regional currencies could limit further gains for the rupee.

(With inputs from agencies.)