The rupee recovered from a low of 60.89 to close at 60.44 against the dollar after the Reserve Bank of India moved to stem speculation in the currency markets.

The RBI ruled that foreign institutional investors would require a mandate from participatory note (P-Note) holders to hedge on their behalf. This move, traders say, will help in reducing volatility in the spot currency as well as the futures markets.

“The new announcement helped the rupee to gain in the last session of the day’s trade as foreign banks sold dollars after the RBI announcement,” said a senior treasury official of a public sector bank.

The RBI is trying to contain the volatility and the extent of its success will be known in a month or so, the official said.

Intraday, the rupee moved between a high of 60.26 and a low of 60.89, respectively.

Earlier, Finance Minister P. Chidambaram promised more measures to prop up the currency, such as reducing the amount of non-essential imports and issue of quasi-sovereign bonds.

Call drops, bond yields soften

The inter-bank call money rates, the rates at which banks borrow short-term funds from each other, fell to 7.50 per cent at close from previous close of 9.75 per cent.

The benchmark 7.16 per cent government security, which matures in 2023, closed higher at Rs 93.93 from previous close of Rs 93.25. Yields on the benchmark G-Sec softened to 8.06 per cent from previous close of 8.17 per cent.

Once the RBI withdraws the liquidity tightening measures, yields will soften further, according to a bond market dealer.

>satyanarayan.iyer@thehindu.co.in

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