The rupee logged its best monthly gains in more than 17 years in January aided by a rebound in foreign fund inflows, as investors bet on a monetary easing that will accelerate growth in Asia's third-largest economy.
On Tuesday, the Indian currency ended at 49.44/45 to the dollar. In January, the rupee has strengthened about 7.45% against the dollar, the largest monthly gain since the last month of 1994.
Just a few weeks after slashing the Cash Reserve Ratio to inject liquidity in the system, the RBI has hinted there could be another cut in the offing. Speaking to reporters yesterday, Deputy governor Subir Gokarn said that the RBI is keeping a close eye on liquidity situation.
“There are indications liquidity pressures persists, and global environment is still uncertain,” he said. Re-orienting expenditures is important now. “Option of another CRR cut is on the table. However, RBI will factor in global and domestic events for any rate cut,” said Gokarn.
CRR move, if any, likely only in mid-quarter, he confirmed, as according to him, interest rate cycle has peaked. Past measures to curb rupee drop are ‘still on table', he said.
Source : yourmoneysite.com