Rupee jumps 50 paise against dollar after RBI eases FPI investment norms

Rupee rallies after RBI unveils steps to attract foreign investments. Representational Pic

The Indian rupee appreciated sharply against the US dollar on Friday after the Reserve Bank of India eased investment norms for foreign portfolio investors (FPIs) and announced measures aimed at improving capital flows, boosting investor sentiment.

The domestic currency strengthened by 50 paise to 95.24 against the US dollar in intraday trade after opening at 95.72 in the interbank foreign exchange market. The currency had settled at 95.74 against the dollar in the previous session.

The sharp appreciation came after the RBI kept policy rates unchanged for the second consecutive meeting while unveiling measures to improve investment flows and market confidence amid global uncertainties.

Announcing the second bi-monthly monetary policy of FY27, RBI Governor Sanjay Malhotra said the Monetary Policy Committee (MPC) unanimously decided to retain the repo rate at 5.25 per cent while maintaining a neutral policy stance.

The central bank also raised investment limits for Non-Resident Indians (NRIs) and Overseas Citizens of India (OCIs) in equity instruments and eased norms governing FPI investments in government securities.

Malhotra reiterated that the RBI's exchange rate policy remains unchanged and that the central bank does not target any specific level or trading band for the rupee.

According to experts, measures such as expansion of the Fully Accessible Route (FAR) for bonds, easing FPI debt investment norms, a temporary FCNR(B) deposit window and concessional foreign exchange swap facilities are expected to support the domestic currency and improve dollar inflows.

They added that while the central bank acknowledged risks from elevated crude oil prices and revised inflation projections higher, its reassurance on adequate forex reserves -- currently around USD 682 billion -- helped boost market confidence.

In addition, global crude oil prices remained elevated, the international benchmark Brent crude traded nearly 1 per cent higher trading 0.36 per cent higher at USD 95.37 per barrel in futures trade.

Moreover, the RBI revised its macroeconomic projections, lowering FY27 GDP growth estimates to 6.6 per cent from 6.9 per cent earlier while raising CPI inflation projections to 5.1 per cent from the previous estimate of 4.6 per cent.

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