Rupee Rebounds: Governor's Dovish Pause Boosts Currency, RBI Takes Strategic Steps

The Indian rupee rebounded by 15 paise against the US dollar, reaching 88.65 on Wednesday, spurred by the Reserve Bank of India's (RBI) decision to maintain interest rates while hinting at potential easing. Governor Sanjay Malhotra's dovish tone aligned with market expectations, aiding the currency's recovery.

The RBI's monetary policy committee unanimously opted to keep the repurchase rate at 5.5% and maintain a 'neutral' policy stance, allowing flexibility for future adjustments. New directives included enabling INR-based transactions for cross-border trades with neighboring countries, with broader use of Special Rupee Vostro Account balances for investments.

The measures are designed to lessen the economy's reliance on the US dollar, mitigating risks associated with currency fluctuations and potential crises. Despite these changes, foreign institutional investors offloaded equities worth Rs 2,327.09 crore, while the fiscal deficit hit 38.1% of the full-year target at August's end.