The rupee hit a three-month high on Wednesday at 61.26 against the dollar before ending flat at 61.41 tracking the benchmark equity indices and a slightly volatile dollar.
The domestic currency opened at 61.50 as against a close of 61.41 on Tuesday. Heavy inflows into the domestic equity markets and a weaker American dollar against the Euro helped the rupee strengthen to 61.26 levels.
BSE-benchmark Sensex gained over 200 points during the day but later ended flat at 29,560. The outflows from the equity market impacted the rupee which slipped to 61.41 at day’s close.
Intra-day, the rupee traded in the range of 61.26 and 61.52 against the dollar.
“While sufficient capital flows are likely to be favourable for the rupee, we expect RBI to prevent sharp appreciation by accumulating foreign exchange (forex) reserves. Thus, huge Balance of Payments surplus will not translate into appreciation of the rupee, unless RBI changes its forex management strategy,” said Upasna Bhardwaj, Economist at ING Vysya Bank, in a report.
The report added that the rupee is expected to trade in the 60.50-62.50 band over the next 3-4 months. However, it will come under pressure in the second half of 2015 as the US Fed finally begins on the rate hike cycle and oil prices start reversing some of the recent losses.
Call rate ends lower, bonds flat
The interbank call money rates, rates at which banks lend each other for daily mismatches, ended sharply lower by 100 basis points at 6.80 per cent from Tuesday’s close of 7.80 per cent. Intra-day, the call money market moved in a wide range of 6.75 per cent to 8.15 per cent.
The yield on the benchmark government security (8.40 per cent G-Sec, maturing in 2024) ended flat at Rs 104.62 from the previous close of Rs 104.63, The yields remained flat for the second consecutive day at 7.70 per cent from Tuesday’s close. Bond yields and prices move in opposite directions.