By Jaspreet Kalra
MUMBAI, October 1 (Reuters) -The Indian rupee nudged higher on Wednesday in a modest advance that was still enough to notch its best day in two weeks after the Reserve Bank of India kept policy rates unchanged and the dollar slipped broadly as the U.S. government shut down.
The rupee closed at 88.69 against the U.S. dollar, up 0.1% on the day, the most since September 17. The rupee hasn’t gained in nine out of the last 10 sessions. Meanwhile the dollar slipped to a one-week low against major peers.
Though the rupee appeared on course to open below its all-time low of 88.80 early in the session, likely intervention by the central bank helped limit the pressure on the currency, traders said.
State-run banks were spotted offering dollars consistently early in the session, most likely on behalf of the RBI, a trader at a large private bank said.
The central bank kept its policy rate unchanged on Wednesday, signalling room to lower rates in December as it assesses the impact of domestic tax cuts and punitive U.S. tariffs on the South Asian economy.
“We see a gradual depreciation of the INR over the medium term as an appropriate response to external demand risks,” analysts at ANZ said in a note. Current projections indicate the possibility of another rate cut in December 2025, the note added.
India’s benchmark equity indexes, the BSE Sensex and the Nifty 50 ended higher by 0.9% each, led by gains in banking stocks after the central bank unveiled a raft of measures to boost bank lending to capital markets and large corporates.
The central bank also announced measures to boost the rupee’s international usage.
Meanwhile, the dollar index was down 0.2% at 97.6 after dipping to a one-week low earlier as a U.S. government shutdown unsettled markets and risked delaying data seen key to gauge the future path of Fed policy rates. Asian currencies were flat to slightly higher.
(Reporting by Jaspreet Kalra; Ronojoy Mazumdar)
