The rupee appreciated to 49.87 against the US dollar in early trade On Monday on account of an increased interest by portfolio investors in the equity markets and the weakening of the greenback against major currencies worldwide on the back of positive economic sentiments.
According to Bloomberg data, at 49.97 against the dollar, the rupee was at its strongest level since February 25. The Indian currency has rebounded by over 4 per cent since reaching a record low of 52.19 on March 3.
This appreciation during four consecutive trading sessions is the longest rising streak for the rupee in nearly two months and is based on the rally in the stock markets.
“The rise was tracking the positive equity markets and loss of dollar against other currencies. May be it overreacted slightly,” said V Kumar, assistant general manager at State Bank of Travancore.
With signs of an improvement in the global economic situation, Asian currencies – led by the Korean won – rallied, which had a positive influence on the rupee.
| HOW THEY STACK UP Currency per dollar | |||
| Jan 01,09 | Apr 06,09 | % change | |
| Japanese yen | 90.74 | 100.82 | -11.11 |
| Singapore dollar | 1.43 | 1.51 | -5.07 |
| Indonesian rupiah | 10,875.00 | 11393.00 | -4.76 |
| Korean won | 1,260 | 1309.25 | -3.95 |
| Indian rupee | 48.77 | 50.06 | -2.65 |
| Malaysian ringgit | 3.47 | 3.56 | -2.64 |
| Thai baht | 34.78 | 35.27 | -1.41 |
| Taiwan dollar | 32.82 | 33.11 | -0.89 |
| Hong kong dollar | 7.75 | 7.75 | -0.01 |
| Source : Bloomberg | |||
What boosted sentiments was US Federal Reserve Chairman Ben Bernanke’s statement that programmes to restore the flow of credit in the US were having the intended effect.
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The won was trading near its highest level in almost three months against the US currency, while the Indonesian rupiah became the strongest since January.
While the Indian currency opened at 50.36 against the US dollar before gaining, it fell to a low of 50.44 later in the day on higher demand from importers.
Dealers said that some of the demand was related to the rise in gold purchases after the yellow metal’s prices dropped globally.
Offshore contracts indicate that traders bet the rupee will trade at 50.21 to the dollar in a month, compared with expectations of a rate of 50.50 on April 2. Forwards are agreements in which assets are bought and sold at current prices for future delivery. Non-deliverable contracts are settled in dollars rather than the local currency.
In the futures market too, the rupee ended stronger with one-month contract on the National Stock Exchange ending at 50.19 against the dollar, compared with Thursday’s close of 50.51. Similarly, on the MCX, one-month contract ended at 50.19, stronger than Thursday’s close of 50.91.
Yields hit a 4-month high
Bonds fell on speculation investors will demand higher yields at a debt sale this week, the second auction since the fiscal year began on April 1.
Ten-year note yields were near a four-month high as the federal government prepared to sell Rs 12,000 crore of bonds on April 9. The yield on the 6.05 per cent note due February 2019 rose four basis points to 7 per cent at the close from April 2, according to the central bank’s trading system. The price fell 0.27, or 27 paise per 100-rupee face amount, to 93.30. Markets were closed on April 3 for a public holiday.
India plans to sell a record Rs 48,000 crore of debt a month through June to finance its stimulus spending, according to its borrowing calendar. Benchmark yields surged 1.75 percentage points last quarter, the most in at least a decade.
“I expect sustained pressure on yields to rise because we are seeing unprecedented supply with nothing much to support,” said S. Srikumar, chief debt trader at state-owned Corporation Bank in Mumbai. “It looks unlikely that the present momentum of yields will reverse anytime soon.”
The government on April 9 plans to sell Rs 8,000 crore of the 2019 notes and Rs 4,000 crore of the 7.5 per cent bonds due 2034. India plans to raise Rs 2.41 lakh crore from debt sales in the first six months of this fiscal year, RBI said March 26.