Rupee Expected To Open Lower Even As Stocks Rise

Forwards indicate a lower open for the rupee, USD gained rallied sharply on Friday and has held the majority of its gains. INR plunged on Friday, recording its worst day in 18-months, after GDP data while a USD rally exacerbated the move.

• Data late on Friday showed the Indian economy returned to growth in Q4, GDP rose 0.4% against expectations of a 0.6% rise. The finance ministry said the return to growth was "a reflection of a further strengthening of V-shaped recovery that began in 2Q of 2020-21, after a large GDP contraction in 1Q followed one of the most stringent lockdown imposed by government relative to other countries", adding that the V- shaped recovery was driven by rebound in both private final consumption expenditure and gross fixed capital formation
• The RBI also announced on Friday that its current inflation targeting regime is effective at containing price-growth and that it recommends the government renew it for another five years. The RBI targets inflation in a band of 2%-6%.
• Elsewhere it was announced that the RBI bought $3.99bn of FX in spot market in December, USD/INR fell 1.32% in the period, the sharpest drop since August 2020. RBI's net outstanding forwards FX book rose to $39.8b as of end-Dec. from $28.3b in the previous month