The rupee on Monday closed 7 paise weaker at 61.53 against the dollar on expectations of a hawkish monetary policy by the Reserve Bank of India in its policy review on Tuesday. The domestic unit had closed at 61.46 per dollar on Friday.
It opened a tad stronger at 61.43 on Monday and gained to 61.39 per dollar during the day. However, citing urgency to anchor inflationary expectations the RBI hinted at hiking the key interest rate in its report on macroeconomic and monetary developments a day prior to the second quarter review, making investors cautious.
The RBI will announce its second quarter monetary policy review on Tuesday. It is expected to hike in repo rate and a decrease in the Marginal Standing Facility (MSF) rate by 25 basis points each.
On Monday, the RBI study of professional forecasters said the average WPI inflation will climb up to 6 per cent from the earlier median expectation of 5.3 per cent, while reduced the growth projection for the current fiscal to 4.8 per cent from 5.7 per cent earlier.
This weighed on the rupee and it declined to 61.61 against the dollar in the afternoon trades.
Further, BSE-benchmark Sensex ended down by 113 points (0.55 per cent) at 20,570 points at day’s close.