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The rupee breached the Rs 60 per dollar mark again in intra-day trades on Friday due to heavy dollar demand by oil importers. However, during afternoon trades it recovered a tad and ended the day stronger by 5 paise at Rs 59.63 per dollar.
The rupee had opened at Rs 59.76 and traded in a range of Rs 59.61 to Rs 60.17. It had closed at Rs 59.68 on Thursday. According to currency dealers, dollar sale by state-run banks on behalf of the Reserve Bank of India (RBI) helped the recovery of the rupee.
The rupee breaching the Rs 60 mark took a toll on the bond market. The yield on the 10-year benchmark bond 7.16% 2023 ended at 7.54% on Friday compared with previous close of 7.47%.
RBI data released on Friday showed that in the week ending July 5 total reserves fell by $ 4.5 billion to $ 280.2 billion. During the week foreign currency fell by $ 3.2 billion to $ 252.1 billion. According to dealers this is because the central bank has been intervening in the market to arrest the fall in the rupee and fresh inflows are not coming in to compensate for the dollar sale by RBI.
RBI had called a meeting with Oil marketing Companies (OMCs) on Monday to explore the possibility of dollar sales to OMCs directly. However, according to currency dealers the discussion is yet to react a firm conclusion.
The government decided to release the Index for Industrial production (IIP) data for May and Consumer Price Index (CPI) inflation data for June after market hours in order to prevent any knee-jerk reaction to such information.
According to dealers, if these data points were release during market hours, then it would have resulted in selling pressure by Foreign Institutional Investors (FIIs) in debt as well as equity due to which the rupee would have ended weak compared with previous close.
IIP for May contracted by 1.6% compared with a growth of 2.3% in April while CPI inched up to 9.87% in June versus 9.31% in May.
However, the impact will be felt on Monday and the street expects the rupee to breach the Rs 60 per dollar mark again.
