Amid global and domestic political crisis, the rupee recovered from two-week lows to close flat from Tuesday’s close of 54.37 against the dollar on capital inflows.
The Indian unit had closed lower on Tuesday after the RBI cut its policy rate 25 basis points leaving limited room for further cuts.
On Wednesday, the rupee opened lower at 54.52 on the Interbank Foreign Exchange market due to a weaker euro and domestic equity market.
The Euro dropped to four-month lows after lawmakers in Cyprus rejected a bank deposit levy which was crucial to rescue the country’s crisis within the euro bailout.
In addition, domestic political crisis, with Karunanidhi-led DMK withdrawing support as an ally from the UPA government, added to the currency woes.
However, the rupee recovered to 54.26 against the dollar on capital flows by banks and exporters on the back of government approval for share sale of Steel Authority of India Ltd (SAIL), which will be conducted on March 22. Also, the euro recovered on the possibility of a bailout deal.
Call Rates and G-Secs
The interbank call money rates ended higher at 7.70 per cent from their previous close of 7.65 per cent. After opening flat, the call money market moved in the range of 7.50 and 7.75 per cent.
The 8.15 per cent Government security, which matures in 2022, declined to Rs 101.44 from Tuesday’s close of Rs 101.58, while the yields rose to 7.92 per cent from 7.90 per cent.