MUMBAI, Sept 30 (Reuters) - The Indian rupee rose against the dollar on Friday, ahead of the Reserve Bank of India's policy review that takes place amid mounting pressure on the local unit.
The rupee was quoting at 81.56 by 0404 GMT, up from 81.86 in the previous session.
The RBI–at 1000 Indian Standard Time (0430 GMT)–is expected to raise rates by 50 basis points as it seeks to bring down inflation and looks to protect the rupee that in recent sessions has repeatedly notched record lows.
"Any out of the box measures to stem the rupee depreciation would be in focus," IFA Global Research Academy said in a note.
The RBI is said to be contemplating measures such as opening a special window for oil importers and reducing hedging costs for foreign-currency depositors to slow the pace of decline, the Economic Times reported earlier this week, citing people familiar with the matter.
The rupee received a boost from data out late Thursday that showed that India's current account deficit widened less than expected in the April-June quarter.
India's CAD for the period was $23.9 billion, wider than the $13.4 billion in the preceding quarter but lesser than the $30.5 billion economists were expecting.
In terms of percentage of the GDP, the CAD widened to 2.8%, the highest in four years. A Reuters poll of 18 economists were expecting CAD of 3.6% of the GDP.
"CAD came in better than expected due to the upside surprise in services," Kotak Securities' Suvodeep Rakshit said.
Meanwhile, FTSE Russel said India will be retained on its watch list for a potential upgrade to Market Accessibility Level '1' and for consideration for inclusion in the FTSE Emerging Markets Government Bond Index (EMGBI).
"The FTSE announcement is a non-event for the rupee. The J.P. Morgan decision is the one that matters," a trader at a private sector bank said. (Reporting by Nimesh Vora; Editing by Savio D'Souza)
