The rupee reversed all early losses on Monday to end higher, stoked by dollar inflows and boosted by a rebound in the local share market. It settled at 51.36/37 to the dollar, 0.3 per cent up from Friday’s close of 51.53/54, after dipping to 51.79 in early trade.
“There was initial selling pressure on the rupee due to Standard & Poor’s action on the euro zone,” said Ashish Barua, a senior forex dealer with IndusInd Bank.
“But dollar inflows with some foreign banks helped the rupee recover and we should expect the currency to move in the 51.25 - 52.00 band.” A rebound in the local equities led by auto and software stocks after data showed headline inflation in December slowed sharply also aided the rupee, traders said.
The outlook for the rupee is mixed as the expected growth boosting measures from policymakers are seen supporting equities and the currency, but weak macroeconomic fundamentals are seen weighing.
Bonds rise
Ten-year bonds rose, sending yields to the lowest level in eight months, on optimism that slowing inflation would encourage the central bank to reduce interest rates.
Wholesale prices probably increased 7.40 per cent in December, the least in two years, according to a Bloomberg News survey. The central bank, which boosted its repurchase rate by 3.75 percentage points in the last two years to 8.5 per cent, left the benchmark unchanged at the last review on December 16. “The undercurrent is for a softer interest-rate regime,” said Roy Paul, deputy general manager of the treasury at Federal Bank Ltd. in Mumbai. “Investors may boost their bond holdings on positive real yields.” The yield on the 8.79 per cent bonds due November 2021 fell five basis points, or 0.05 percentage point, to 8.15 per cent here, according to the central bank’s trading system.
Call rate low
The call rate finished lower on the overnight call money market here on Monday, owing to lack of demand from borrowing banks and ample liquidity in the banking system. The rate ended lower at 8.70 per cent from last Friday’s closing level of 9.50 per cent. It moved in a range of 9.20 per cent and 8.70 per cent.