The Indian rupee strengthened by 15 paise to close at 87.43 against the US dollar on Friday after the Reserve Bank of India cut the repo rate for the first time in five years.
Following the Monetary Policy Committee's announcement, the local currency rose 25 paise to 87.33 against the greenback. It opened higher at 87.48 a dollar. The rupee had closed at 87.58 on Thursday, according to Bloomberg data.
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The MPC cut the repo rate by 25 basis points to 6.25%. The RBI, under the new Governor Sanjay Malhotra, voted unanimously to continue with a 'neutral' stance.
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Interventions in the FX market focus on smoothening volatility, according to the RBI governor. He added that the RBI does not target a certain level for rupee's exchange rate.
The central bank has already announced liquidity enhancement measures that have improved conditions in the market.
Governor's Take
The movements in rupee must not be looked at from day-to-day movements and seen at a longer time frame, the RBI governor said, adding that global uncertainties are a higher worry at this stage.
Governor Sanjay Malhotra said the rate that the rupee settles is a function of demand and supply. The rupee should be looked at in the long-term movement, he added.
Global uncertainties are a higher worry for the RBI at this stage as it has a direct impact on growth, investment, consumption. The appreciation of the dollar and depreciation of the rupee are linked to global uncertainty, Malhotra noted.
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