USD/INR logs biggest single-day drop since Nov. 1 ahead of the RBI rate decision
- The Rupee strengthened Wednesday despite dovish RBI expectations.
- RBI is expected to cut rates by 25 basis points on Wednesday.
USD/INR pair fell 0.44% on Wednesday, confirming the biggest single-day drop since Nov. 1.
The Indian unit found takers despite dovish expectations for more easing by the Reserve Bank of India (RBI).
India's gross domestic product (GDP) growth hit an over six-year low of 4.5 percent in July-September 2019, the official data released last Friday showed.
Even so, the Indian Rupee has remained resilient this week. The currency fell to 71.75 per US dollar on Monday only to rise to 71.35 per dollar on Wednesday.
RBI to cut rates
The Indian central bank is expected to cut rates by 25 basis points on Thursday on growth concerns.
The bank has already cut the current fiscal year's GDP forecast by 80 basis points and has reduced rates by 135 basis points since February 2019.
Even so, the growth remains tepid. As a result, many economists believe additional rate cuts may not have a material impact on the economy.
The Rupee, however, may come under pressure if RBI's head Shaktikanta Das sends out a strong dovish signal for 2020.
The Rupee may open higher in response to the dismal US data released Wednesday. The Institute for Supply Management (ISM) non-manufacturing activity index fell to 53.9 in November, down from 54.7, meanwhile, the ADP National Employment data showed an increase of just 67,000 jobs, which was only about half the number expected.
Technical levels