The USD gained v/s the Indian rupee Tuesday on weakness in the domestic shares coupled with recovery of the USD against other major currencies. The MCX SX Oct future contract closed the session at 46.90, gaining over half a percent. Rates rose to a high of 47.00 in the evening session.
In the monetary policy review, RBI maintained repurchase rate or repo rate, at 4.75% and reverse repo rate at 3.25%, and the cash reserve ratio at 5%.But the RBI surprised the market by announcing the exit of an easy money policy. The statutory liquidity ratio (SLR), which prescribes the percentage of deposits that banks are required to invest in government debt, has been raised to 25% from 24%.
A government panel last week forecast inflation to reach about 6 percent by the end of the fiscal year, although some economists have said that figure could rise to about 8 percent. While the RBI's comfort level for inflation is seen at about 5 percent, the central bank has been under pressure from the government to keep monetary policy loose to foster growth.
In the Global markets, the USD gained other currencies with the Dollar index posted a high of 76.49 at New York trading. The index closed at 76.28, up by 0.09 points since the previous closing.
The USD INR pair has opened up in the Asian trading session and holding above the psychological level of 47. Regional shares lost today after weak closing of the US indices. The SXG nifty is currently trading at 4803, down 38 points.
Outlook
The USD INR pair is expected to stay higher for the session with month end dollar buying by importers and recovery of the US dollar globally. We maintain a positive outlook on the pair for the session. Buying is recommended on dips.
Recommendation/ Strategy
Buy USD INR Oct NSE contract at 46.95-47.00 range targeting 47.2 with stoploss below 46.79
