The rupee settled on a flat note at 82.96 (provisional) against the U.S. dollar on February 8, after the Reserve Bank of India decided to keep the key policy rate unchanged for the sixth time in a row to maintain a tight vigil on inflation.
Forex traders said a negative trend in domestic equities weighed on investor sentiments.
At the interbank foreign exchange, the rupee opened at 82.94 against the dollar and moved in a narrow range and settled for the day at 82.96 against the American currency, as the central bank retained the repo rate at 6.5% for the sixth consecutive time.
During the day, the rupee touched an intraday high of 82.89 and a low of 83 against the U.S. dollar.
On February 7, the rupee appreciated 9 paise to close at 82.96 against the dollar.
The Indian rupee remained flat as RBI maintained status quo in its monetary policy for the sixth consecutive time and left Repo Rate unchanged at 6.5%, in line with street expectations.
The central bank revised FY24 GDP projections higher at 7.3% from 7% and projected FY25 GDP at 7%. It also projected CPI (consumer price-based inflation) in FY25 lower at 4.5%.
However, the rupee lost earlier gains as domestic markets declined and U.S. dollar also recovered.
"We expect rupee to trade with a slight negative bias on expectations that US dollar may recover amid hawkish U.S. Fed speak and geopolitical tensions," said Anuj Choudhary, Research Analyst, Sharekhan by BNP Paribas.
Israeli Prime Minister rejected a peace proposal by Hamas which may also lead to rise in crude oil prices.
However, positive global markets may support rupee at lower levels. Traders may take cues from weekly unemployment claims data from U.S. and speeches by various Fed officials. USD-INR spot price is expected to trade in a range of ₹82.70 to ₹83.30.
Announcing the bi-monthly monetary policy, RBI Governor Shaktikanta Das on February 8 said the Monetary Policy Committee (MPC) will remain watchful of food inflation so that the benefits gained are not frittered away.
The RBI on February 8 projected a Gross Domestic Product (GDP) growth of 7% for 2024-25, which is lower than the 7.3% expansion estimated for the current fiscal.
Mr. Das said rural demand continues to gather pace, urban consumption remains strong and investment cycle is gaining steam on the back of increased capex.
He said there are signs of revival in private investments.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.03% higher at 104.08.
Brent crude futures, the global oil benchmark, rose 0.16% to $79.34 per barrel.
In the domestic equity market, the 30-share BSE Sensex closed 723.57 points, or 1%, lower at 71,428.43. The broader NSE Nifty declined 212.55 points, or 0.97%, to 21,717.95.
Foreign institutional Investors (FIIs) were net sellers in the capital markets on February 7 as they offloaded shares worth ₹1,691.02 crore, according to exchange data.
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