Rupee fell on Monday as the central bank kept interest rates on hold and on caution ahead of the U.S. Federal Reserve's meeting this week, although a lower-than-expected trade deficit helped to cap the currency's losses. The Reserve Bank of India kept its repo rate steady, warning of upwards risks to inflation and global economic uncertainty, in a decision that had been widely expected. A rate cut benefits the rupee by increasing confidence on the economic outlook and sparks hopes of more foreign inflows. Meanwhile, markets are keenly awaiting US Federal Reserve's meeting on Wednesday where the US central bank will give guidance on its bond buyback programme. Fed action is likely to determine the rupee's further course. If US withdraws its bond buyback programme, rupee may slide further.
Meanwhile, a bout of volatility was witnessed in early trade as key benchmark indices slipped into the negative terrain after opening slightly higher. Asian shares were pressured on Tuesday despite an overnight rise in global markets, with investors awaiting for news of the Fed's plans for its stimulus programme from the two-day monetary meeting starting later in the session. Foreign institutional investors (FIIs) sold Indian shares worth a net Rs 165.09 crore on Monday, 17 June 2013, as per provisional data from the stock exchanges. At the time of writing, the S&P BSE Sensex was down 78.39 points or 0.41% to 19,247.48 while the CNX Nifty was down 23.90 points or 0.41% to 5,826.15.
The U.S. dollar hovered above a two-month low against the yen on Tuesday but uncertainty ahead of the outcome of the U.S. Federal Reserve meeting is likely to cap further gains. The euro stayed above 1.33 to the dollar. The dollar index was sub 81 mark. However, the yen slipped slightly against the dollar.
Source by Commodity Insights
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