Mumbai, Dec 5 (PTI) The rupee appreciated 20 paise to 89.69 against the US dollar in early trade on Friday, ahead of the Reserve Bank's monetary policy decision.

Forex traders said investors remain cautious ahead of the RBI's monetary policy decision, noting that a neutral stance may not shake markets much.

But any hint of a rate cut could put fresh pressure on the rupee, especially given the currency's already fragile state, they added.

Moreover, selling pressure from foreign investors, rising crude oil prices and the delay over the announcement of the India-US trade deal have also weighed on the rupee.

At the interbank foreign exchange market, the rupee opened at 89.85 against the US dollar and gained ground, touching 89.69 in morning deals, registering a 20 paise gain from its previous close.

On Thursday, the rupee rebounded from its all-time low levels, appreciating by 26 paise to close at 89.89 against the greenback.

RBI Governor Sanjay Malhotra will announce the bi-monthly policy amid mixed expectations of a 25-basis-point rate cut and the possibility of the central bank opting for the status quo.

Reserve Bank's rate-setting panel -- Monetary Policy Committee (MPC) -- started its three-day deliberation on the next set of bi-monthly monetary policy on Wednesday.

The meeting is taking place against the backdrop of falling inflation, rising GDP growth, the rupee crossing 90 against the dollar and ongoing geopolitical tensions.

"This morning, all eyes are on the RBI’s Monetary Policy Committee meeting. A rate cut, or even a hint of a possible cut in the future, given India’s ultra-low inflation, could weigh further on the rupee," CR Forex Advisors MD Amit Pabari said.

Pabari further said that markets aren't just focused on interest rates; more importantly, they are looking for the RBI’s view on the currency’s recent slide.

Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.05 per cent higher at 90.03.

Brent crude, the global oil benchmark, fell 0.21 per cent to USD 63.12 per barrel in futures trade.

On the domestic equity market front, Sensex advanced 53.54 points to 85,318.86 in early trade, while the Nifty was up 28.2 points to 26,061.95.

Foreign institutional investors sold equities worth Rs 1,944.19 crore on a net basis on Thursday, according to exchange data.

On the domestic macroeconomic front, Fitch Ratings on Thursday raised India's GDP growth forecast for the current fiscal to 7.4 per cent, from 6.9 per cent, on increased consumer spending and improved sentiment boosted by GST reforms.

It said falling inflation gives the Reserve Bank of India (RBI) room for one more policy rate cut in December to 5.25 per cent, following 100 bp of cuts so far in 2025. PTI DRR DR DR

Rupee rises 20 paise to 89.69 ahead of RBI policy meeting; rate cut prospects could pressure the currency. The rupee rose 20 paise to 89.69 versus the US dollar ahead of the Reserve Bank's bi monthly monetary policy decision, with markets wary that a rate cut or its prospect could weaken the currency. Foreign investor selling, higher crude prices and delays in a trade deal with the United States are cited as additional pressures. Falling inflation and an upgraded GDP growth forecast create scope for another policy rate cut, while the RBI's view on the currency's recent slide remains central to market reaction.