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The rupee weakened for a second straight day, to end at a level beyond the 63-a-dollar mark, owing to demand for the greenback from state-run oil marketing companies (OMCs). The weakening comes despite the Reserve Bank of India (RBI)'s intervention.
The currency ended at a two-month low of 63.70 a dollar, compared to Monday’s 63.24. It had ended at 63.84 a dollar on September 10. The rupee opened at 63.44 and during intra-day trade, touched a low of 63.83 against the US currency.
RBI's efforts to arrest the weakness did not yield results, since even the domestic equity market closed bearish, said currency dealers from state-run banks.
“Globally, the euro is weakening against the dollar, due to which there is an impact even on the rupee. There is demand from OMCs for dollars, keeping the rupee under pressure,” said N S Venkatesh, chief general manager and head of treasury, IDBI Bank, and chairman of the Fixed Income Money Market and Derivatives Association of India.
Due to pairing of positions by traders in the bond market, government bond yields rose, he added. The yield on the 10-year benchmark 7.16 per cent 2023 ended at 9.05 per cent, compared to the previous close of 8.95 per cent. This is the second time the yield ended above nine per cent in the current financial year. It had ended at 9.23 per cent on August 19.
Currency dealers see the rupee breaching 64 a dollar on Wednesday, as the dollar demand from OMCs will continue. The rise in Consumer Price Index (CPI)-based inflation, reported after market hours, would also result in the rupee trading weaker, said dealers.
The annual CPI inflation for October rose 10.1 per cent in October from 9.8 per cent in September, driven by food prices, the data showed on Tuesday.
