The USDINR pair made a flat opening at 74.43 levels and traded in the range of 74.30-74.53 with a sideways bias. The pair finally closed at 74.50 levels. The Reserve Bank of India set the reference rate at 74.3618. The USDINR pair had opened steady today on back no major trigger before the FOMC policy meeting on Jan 25-26. However, later in the day USDINR pair slightly rose because some state-owned and private banks purchased the US dollar on behalf of oil marketing companies, noting elevated Brent crude oil prices.
A sharp fall in domestic equity indices also dampened sentiment for the Indian currency. Market participants are expecting cues on the pace at which the US central bank will end its bond purchase programme, as well as on when it might begin reducing the size of its massive balance sheet to curb inflation. Investors expect the Fed to hike interest rates in March, for the first time since the start of the COVID-19 pandemic, while already pricing in four rate hikes in 2022.
On the contrary, China’s central bank cut its benchmark lending rates again amid concerns about an economic slowdown in the world’s second-largest economy. The People’s Bank of China reduced the one-year loan prime rate by 10 basis points from 3.8% to 3.7%. The Central Bank of the Republic of Turkey kept its key policy rate one-week repo rate unchanged at 14%, in line with expectations. The decision was announced after the first monetary policy meeting of the year.
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