The rupee gained the most in two weeks on speculation that the central bank would raise interest rates this week for the fourth time this year, helping draw global funds to local assets.
The Reserve Bank of India is expected to increase its benchmark repurchase rate by a quarter of a percentage point to 7.5 per cent at a June 16 meeting to cool inflation, according to the median estimate of 19 economists in a Bloomberg survey. Overseas funds bought $197 million more rupee-denominated debt than they sold this month, after boosting holdings by $603 million in May, according to the Securities & Exchange Board of India.
“The rupee market is pricing in the probability that further rate increases by RBI would attract more capital inflows,” said Sudarshan Bhatt, chief currency trader at Corporation Bank in Mumbai.
The rupee appreciated 0.3 per cent to 44.745 per dollar at close in Mumbai, according to data compiled by Bloomberg. That is the biggest advance since June 1 and trimmed this quarter’s loss to 0.3 per cent, still the second-worst performance among Asia’s 10 most-used currencies. The rupee may trade between 44.50 and 45.20 in the coming month, Bhatt predicted.
Bonds drop
Government bonds dropped due to sustained selling pressure from banks and companies.
The 7.80 per cent government security maturing in 2021 dropped to Rs 96.48 from 97.05 yesterday, while its yield firmed up to 8.33 per cent from 8.24 per cent. The 8.13 per cent government security maturing in 2022 declined to Rs 97.76 from 98.44, while its yield rose to 8.44 per cent from 8.34 per cent.
The 8.08 per cent government security maturing in 2022 fell to Rs 97.50 from Rs 98.08, while its yield shot up to 8.43 per cent from 8.35 per cent. The 7.83 per cent government security maturing in 2018, the 7.59 per cent government security maturing in 2016, the 8.26 per cent government security maturing in 2027 and the 7.99 per cent government security maturing in 2017 were also quoted lower at Rs 97.20, Rs 96.91, Rs 96.98 and Rs 98.00, respectively.
Call rate edges up
The call rate closed at 7.30 per cent at the overnight call money market here today, owing to fresh buying support from borrowing banks. The call money rate had closed at 7.25 per cent yesterday. It moved in a range of 7.50 per cent and 7.20 per cent.
