Rupee Closes Stronger After RBI's Surprise Repo Rate Cut

The Indian rupee closed 16 paise stronger at 85.64, against the US dollar on Friday in comparison to its previous close of 85.80 on Thursday. This significant appreciation comes amid various global and domestic economic factors influencing the currency markets.

The domestic currency opened 6 paise weaker at 85.86 against the US dollar on Friday. However, the Rupee was trading stronger "after RBI’s MPC cut rates by 50-bps, more than expectations" said Sriram Iyer, senior research analyst at Reliance Securities.

The RBI also cut the CRR by 100 bps to 3%, injecting Rs 2.5 lakh crore into the banking system in a phased manner, added Saurav Ghosh, co-founder of Jiraaf.

Despite the aggressive rate cut, the RBI has retained its GDP growth forecast for financial year 2026 at 6.5%, while revising inflation projections downward to 3.7%, citing a benign core and soft food inflation outlook, he added.

Ritesh Bhanshali, director at Mecklai Financial Service Ltd., expects the Rupee to face resistance at 86.15 levels and key support lies at 85.50.

Additionally, the US dollar is headed for a weekly loss on Friday, undermined by signs of fragility in the US economy and as trade negotiations between Washington and its trading partners made little progress despite a looming deadline.

On Friday, crude extended decline for the fourth day with Brent crude falling 0.23% to $65.19, as investors remained on an edge over slowing growth and weakening demand although increased actions between Russia and Ukraine limited losses.

Despite being down for four sessions crude is likely to be in positive for the week but demand fears remain as US may put more sanctions against Russia and there were strains in US-Iran talks. It was also up last week as OPEC+ boosted supply in line with market expectations.