Despite RBI measures, Re falls

Mumbai: The rupee declined 19 paise to close at 79.13 (provisional) against the US dollar on Thursday, as the hawkish stance of the US Federal Reserve increased the possibility of another aggressive rate hike this month.

At the interbank foreign exchange market, the local currency opened at 79.05 and finally ended at 79.13, down 19 paise over its previous close. On Wednesday, the rupee closed at 78.94. "Rupee opened on a flat note, but started to come under pressure despite measures announced by the RBI," said Gaurang Somaiya, Forex & Bullion Analyst, Motilal Oswal Financial Services.

The RBI on Wednesday raised overseas borrowing limits for companies and liberalised norms for foreign investments in government bonds as it announced a slew of measures to boost foreign exchange inflows in efforts to curb the fall of the rupee. The central bank had also said it has been closely and continuously monitoring the liquidity conditions in the forex market and has stepped in as needed in all its segments to alleviate dollar tightness with the objective of ensuring orderly market functioning.

Forex traders said the US Federal Reserve's minutes of the meeting held last month indicated a hawkish stance and a rate hike of 75 basis points is likely in July.

The minutes were released on Wednesday. "Dollar rose against its major crosses after the minutes reaffirmed Fed's intent to get prices under control to address stubborn inflation," Somaiya said, adding, "We expect the USD-INR to trade sideways but with a positive bias and quote in the range of 79.05 and 79.80."

The dollar index, which gauges the greenback's strength against a basket of six currencies, fell 0.21 per cent to 106.86. Brent crude futures, the global oil benchmark, advanced 0.81 per cent to $101.51 per barrel.