The rupee gained 54 paise to end at 59.32 to the dollar on Tuesday against the previous close of 59.86 on the back of a series of liquidity tightening measures announced by the central bank on Monday.
Government bond yields jumped the most in four-and-a-half years and overnight indexed swap rates posted their biggest rise in the last decade after the central bank curbed liquidity to prop up the rupee.
“There was a big panic in the market. Bonds yields are now expected to go up while a dearer rupee is likely to create a squeeze in the availability of funds,” said a treasury head from a public sector bank
The rupee opened 66 paise higher at 59.20. Intra-day, it touched a low of 59.48 and a high of 59.18.
“The central bank is giving indications that it is checking the volatility in the currency markets and is closely watching the movement in the rupee.
“Technically, USD-INR pair looks to be in the correction mode and is likely to find support near 58.80 levels,” said Abhishek Goenka, Founder and CEO, India Forex Advisors.
Call rates volatile
Heavy borrowings by banks to the tune of Rs 2.16-lakh crore in the liquidity adjustment facility saw the inter-bank call money rates turn volatile during the day.
The call rates opened sharply higher at 9.25 per cent but fell steeply to end at 6.3 per cent from the previous close of 7.15 per cent.
Bond prices down
The widely traded 8.33 per cent government bond, maturing in 2026, ended sharply lower at Rs 101.2 higher from the previous close of Rs 105.4, while yields hardened to 8.17 per cent from the previous close of 7.66 per cent.