The rupee settled for the day on a flat note higher by just 1 paisa at 84.85 (provisional) against the US dollar on Tuesday, a tad above its all-time low level, as change of guard at the Reserve Bank of India raised expectations of a shift in the central bank's monetary policy.
The government on Monday appointed Revenue Secretary Sanjay Malhotra as the 26th Governor of the Reserve Bank of India.
Forex traders said markets now expect a rate cut in the upcoming monetary policy in February. While a weak tone in the domestic markets and a surge in the US dollar index further pressurised the rupee.
At the interbank foreign exchange, the rupee opened at 84.80 and touched the lowest level of 84.86 against the greenback during intra-day trade. The unit ended the session at 84.85 (provisional) against the dollar, higher by just 1 paisa from its previous close.
On Monday, the rupee saw its steepest fall in over a month and plunged 20 paise to settle at lowest-ever level of 84.86 against the US dollar.
"We expect the rupee to trade with a negative bias on strength in the US dollar and overnight gains in crude oil prices. However, recent FII inflows may support the rupee at lower levels," said Anuj Choudhary – Research Analyst at Mirae Asset Sharekhan.
Choudhary further said that any intervention by the RBI may also support the rupee.
"Investors may remain cautious ahead of US inflation data on Wednesday. Inflation is expected to be higher than the previous month. USD-INR spot price is expected to trade in a range of 84.65 to 85.10," he said.
Shaktikanta Das, who will demit office as the Governor of the Reserve Bank of India on Tuesday, was the key man behind the planning and execution of the demonetisation drive and roll-out of the landmark goods and services tax (GST). At the RBI, he steered India's monetary policy response during the challenging period of the pandemic.
The dollar index, which gauges the greenback's strength against a basket of six currencies, was trading higher by 0.13 per cent at 106.28.
Brent crude, the global oil benchmark, fell 0.36 per cent to USD 71.88 per barrel in futures trade.
On the domestic equity market front, the 30-share benchmark index Sensex closed on a flat note at 81,510.05, higher by just 1.59 points. The Nifty fell 8.95 points, or 0.04 per cent, to 24,610.05 points.
Foreign Institutional Investors (FIIs) were net buyers in the capital markets on Monday, as they purchased shares worth Rs 724.27 crore, according to exchange data.
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