MUMBAI Dec 14 The Indian rupee recovered from
early losses to trade higher on Friday after headline inflation
surprised on the downside, raising hopes the central bank could
start cutting interest rates as early as January.
India's wholesale price index rose a slower-than-expected
7.24 percent in November, less than the 7.6 percent estimated by
a Reuters poll.
While most economists and market participants believe the
central bank may hold rates steady on Dec. 18., some are now
expecting that it will infuse some liquidity in the form of a
cash reserve ratio cut.
"The trending and expectation in headline inflation has
improved, paving way for start of rate cut cycle in
January-March 2013," said Moses Harding, head of asset liability
management at IndusInd Bank.
"A CRR cut of 25 basis points is seen certain to maintain
the positive feel," he said.
The government is trying to push through more reforms,
approving steps on Thursday to speed up infrastructure projects
and facilitate investment into the fertiliser sector.
Local stocks, which were trading flat before the
data release, were up 0.4 percent.
The partially convertible rupee was at 54.32/33 per
dollar at 0700 GMT, 0.2 percent stronger than its Thursday close
of 54.46/47. It had fallen to 54.60 in the session on importer
demand for dollars.
The rupee is also on course for a second week of gains out
(Editing by Jijo Jacob)