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Rupee Kept Rising In A Flighty Week

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BUSINESS STANDARD
Last Updated : Jan 28 2013 | 1:58 AM IST

Last week was a turbulent one to say the least. While one eye of the market was on the US Federal Reserve, seek clues about its long-term outlook on interest rates, the other was glued to the Reserve Bank of India (RBI), in a bid to know whether there will be a follow-up repo rate cut.

The government securities market started last week on an upbeat note backed by the expectation of a Fed rate cut.

While a 25 basis points cut was already factored in, the decision was still being looked forward to because it endorsed the continuation of a soft global interest rate regime.

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Although the Fed cut was announced with riders like more action will follow if the situation demands, the bond market rally was cut short by verbal RBI intervention.

RBI deputy governor Rakesh Mohan and other top officials expressed concern about excess liquidity in the system and announced a three-pronged strategy to tackle it.

This included raising the notified amount at treasury bill auctions, open market operations and advancing the government borrowings programme.

Plus, reiterating that a Fed rate cut does not automatically spur a local rate cut as Indian economic fundamentals remain unchanged before or after the move.

This was followed by an auction announcement to borrow Rs 21,000 crore in the first three weeks of July as against a scheduled Rs 14,000 crore.

Market participants are of the view that though the open market operations and auctions were scheduled, the measures bared the position of the regulator

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First Published: Jun 30 2003 | 12:00 AM IST

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