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Breaking the weakening spree the rupee strengthened on Wednesday due to dollar sale by corporates and custodian banks. The appreciation in the Indian currency was despite month-end dollar demand by importers.
The rupee ended at Rs 62.44 compared with previous close of Rs 62.77 per dollar. The rupee had touched a low of Rs 62.89 and a high of Rs 62.33 during intra-day trades.
The rupee has been weakening since Friday after the Reserve Bank of India (RBI) shocked the market by raising the repo rate by 25 basis points to 7.50%.
“The rupee strengthened today due to dollar sale by exporters, corporates and custodian banks. The month-end dollar demand is not so strong and defense related payments have also not emerged in a big way. By September 30 the rupee will trade in the range of Rs 61.00 to Rs 62.50 and the bias is more towards appreciation,” said Partha Bhattacharya, deputy CEO, Mecklai Financial.
Tracking the appreciation in the rupee government bond yields fell. The yield on the 10-year benchmark government bond 7.16% 2023 ended at 8.79% compared with previous close of 8.84%.
However, bond market sentiments continue to be bearish in a scenario when there are two auction of government bonds being held in the same week.
“There will be partial devolvement on primary dealers even this Friday. There is no appetite for these bonds in the market,” said the head of treasury with a large public sector bank.
On Monday the government bond auction for a notified amount of Rs 15,000 crore devolved partially on primary dealers to the tune of Rs 4,030 crore. Friday RBI will auction government bonds for a notified amount of Rs 14,000 crore.
