Rupee, forward premiums tad up after RBI's inflation comments

A customer hands a 50-Indian rupee note to an attendant at a fuel station in Ahmedabad

By Nimesh Vora

MUMBAI (Reuters) - The Indian rupee rose against the dollar and forward premiums inched up on Wednesday after the Reserve Bank of India (RBI) raised rates by 35 basis points (bps) and said that inflation risks remained.

The rupee was at 82.4750 per U.S. dollar by 10:42 a.m. IST compared with 82.53 before the RBI's policy decision. The November forward premium was at 1.3650 rupees against 1.3450.

The central bank raised the repo rate by 35 bps to 6.25% in a majority decision, in line with expectations. RBI Governor Shaktikanta Das said that further calibrated monetary policy action was warranted to keep inflation expectations anchored.

The main risk was that inflation would remain sticky and elevated, Das said.

On balance, the policy was more hawkish than expected and is supportive of the rupee, other things being equal, a trader at a private sector bank said.

On forward premiums, the trader said the governor's comments were unlikely to arrest the downside momentum. The 1-year USD/INR implied yield is hovering near its lowest level in a decade.

Indian bond yields and OIS (overnight index swaps) rose following the RBI decision.

On the rupee, Das said that it should be allowed to find its own level and that the currency's movements have been the least disruptive relative to its peers. It was important to make an objective assessment of the local currency's movement, he said.

(Reporting by Nimesh Vora; Editing by Janane Venkatraman)