Rupee, Sensex gain with Fed’s decision
Markets and currencies from economies globally showed an amazing rise in today as the US Federal Reserve came with its decision to keep the stimulus policy unchanged. The decision forecast by analysts and experts throughout the world turned out to be exactly opposite as anticipated. The policymakers kept the decision of buying bonds per month formula as it is.
The policy of buying bonds worth US$85 billion per month has been followed by the central bank to recover its economy after the crisis of 2008. It aims to reduce pressure on its economy from the aftermaths of global economic slowdown. The main objective is to reduce unemployment rates and encourage investments from businesses by giving ample space and facilities for the same.
In a statement issued after its two-day meeting, the policy-setting Federal Open Market Committee said that although there was “growing underlying strength in the broader economy…the committee decided to await more evidence that progress will be sustained before adjusting the pace of its purchases.”
Markets including Sensex, Nifty showed gains with the decision coming out as the investors turned towards markets with new hopes for profits. Around the world approximately US$17 billion flowed into the markets with the policy remaining unchanged. The Fed impact was visible with the sensex booming up as much as by 700 points-an unprecedented for last three years. Bonds also hiked to their highest in the month.
Rupee and Indonesian rupiah showed quite good signs as they were among the highest gainers from the decision. The indian currency hiked approximately by 2.6 per cent closing on 61.77 gaining from 63.38 a day earlier. The Fed’s decision seemed to ease pressure on other economies too as other east Asian economies also revived to a great extent in the global market.
All the eyes are watching with curiosity over how the new RBI Governor Raghuram Rajan handles this unexpected development. Investment climate has turned out to be quite volatile with the purchase stimulus at the same pace.
RBI Governor Raghuram Rajan will detail monetary policy on Friday and is widely expected to keep the policy rate and the cash reserve ratio unchanged, according to a Reuters poll. The poll, which was conducted before the Fed decision, also expects the July cash tightening steps to be retained.
A resurgence of inflation to a six-month high in August has muddied waters for the central bank, which has been battling a falling rupee and trying to revive the economy with growth having slumped to a decade low.
S the sensex Sensex is rising and sometime falling .