RBI’s Moves Limited by Record Low Rupee

The slump in the rupee to a record low has narrowed the Reserve Bank of India’s scope to cut interest rates next week for a fourth straight meeting.

Governor Duvvuri Subbarao will keep the repurchase rate at 7.25 percent on June 17, 10 of 18 analysts said in a Bloomberg News survey. The rest called for a reduction to 7 percent. The currency’s about 7 percent drop versus the dollar this quarter, the biggest in Asia, threatens to make imports more expensive.

The rupee reached its weakest level today, weighed down by an unprecedented current-account deficit, the slowest Indian economic expansion in a decade and speculation the dollar will gain if the U.S. scales back monetary stimulus. Subbarao said May 30 that depreciation may stoke inflation and increase the cost of servicing foreign-currency debt.


This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.