Rupee recovers 16 paise from all-time low level to 87.43 against dollar

The rupee recovered 16 paise from all-time low closing level to 87.43 against the US dollar in early trade on Friday, ahead of the Reserve Bank of India's monetary policy announcement.

Forex traders said there is an overall negative bias in the rupee as market participants are projecting RBI to cut rates by 25 bps.

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, they said.

At the interbank foreign exchange, the rupee opened at 87.57 against the greenback, and touched 87.43 against the greenback in initial trade, registering a rise of 16 paise from its previous close.

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

"As long as the liquidity deficit persists, the rupee will remain under pressure. Additionally, the CRR cut is further weighing on the rupee.

"With current headwinds surpassing tailwinds and compounded by the RBI's rate cut expectations, the rupee is expected to trade at elevated levels between 87.20 and 87.70, with 87.20 acting as a support level," CR Forex Advisors MD Amit Pabari said.

The Monetary Policy Committee (MPC) of the Reserve bank of India (RBI) began its three-day meeting on Wednesday. The MPC will announce its policy decision at 1000 hrs.

New RBI Governor Sanjay Malhotra, who is chairing his first Monetary Policy Committee (MPC) meeting, will announce the decision of the six-member panel on Friday morning, amid widespread expectations of 25 basis points reduction in interest rate after a gap of nearly five years.

Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.03 per cent higher at 107.72.

Brent crude, the global oil benchmark, rose 0.50 per cent to USD 74.66 per barrel in futures trade.

In the domestic equity market, the 30-share BSE Sensex was trading 39.26 points, or 0.05 per cent, lower at 78,018.90 points, while the Nifty was down 8.25 points, or 0.03 per cent, at 23,595.10 points.

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