Snaping its losing streak, rupee jumped 20 paise to 63.93 against dollar in trade today. The domestic currency had fallen 9 paise to settle at 64.13 against the greenback on Friday amid sustained demand for the US currency from banks and importers.

Dollar index, which tracks the movement of dollar against a trade-weighted basket of six major world currencies, stood at 97.32, down 0.02 per cent.

All eyes were on the Reserve Bank of India (RBI) policy review on Tuesday. While, the apex bank is largely expected to remain unchanged on policy rates, the currency market is expected to take cues from its comments on the macro economy.

"We continue to expect RBI governor Raghuram Rajan to pause on rates on Tuesday to await further clarity on the monsoon and allow our expected September 17 Fed hike to play out. At the same time, he will likely strike a dovish note to reiterate that the door is open for further rate cuts to support growth," said BofA-ML in a note.

According to the Export-Import Bank of India ( Exim Bank), the rising trend in inflation observed during the last two months and the rainfall deficits are expected to weigh over the considerations of weak economic performance (slack IIP, Trade, Investment numbers and Bank Credit offtake).

"Consequently, policy rate cut by the RBI in its third bi-monthly policy appears bleak. RBI is likely to maintain status quo on rates in its bi-monthly policy meet on August 4," said EXIM Bank's Research and Analysis Group in a note.

Bofa-ML believes that in case rupee trades between 60-62/dollar, the RBI will buy dollars to raise import cover that stands at 8.5 months on 1-year forward basis. At 63-64/USD, there will be only token resistance, as happening now, given US sollar strength and seasonal rupee weaknes.

However, if exchange rate breaches 65 level, then then RBI will sell $15-billion worth dollar to to defend the exchnage rate, the brokerage said in a note.

Source:economictimes.indiatimes.com