Comments
Continuing the free-fall, the rupee ended at 64.60, after hitting a lifetime low of 65.65 against the dollar.
The domestic currency opened weaker at 64.85 against the previous close of 64.02 per dollar. Amid heavy capital outflows and uncertainty in the government and the Reserve bank measures, it declined sharply to 65.65.
However, it recovered after public sector banks sold dollars on RBI’s intervention to stem the currency depreciation.
“Heavy dollar demand from importers, persistent capital outflows due to concerns on funding of the current account deficit weighed heavily on the Indian unit,” said a dealer with a nationalised bank.
The rupee has fallen over 21 per cent since May and about 9 per cent in August.
Sugandha Sachdeva, Assistant Vice President, Currency Research, Religare Securities, “The capital control measures taken by the RBI further heightened the fears of uncertainty in the forex market. Moreover, increasing gold imports are creating more fears of widening CAD.”
According to World Gold Council report, India's gold demand at 566 tonnes jumped 50 per cent year-on-year in the first half of FY13. In addition, India topped gold demand in the second quarter. This is adding to the worries.
“However, the fall is too steep and these high levels of rupee are unsustainable. Government’s measures to reduce capital controls and imports and infusion of foreign investment should support the rupee. We expect the rupee to appreciate to 63.5 levels in 10-15 days,” Sachdeva added.
Call rates firm; Bond market cheers
On the other hand, bond markets continued to rally after the RBI’s liquidity easing measure announced on Monday.
The benchmark 7.16 per cent government security, which matures in 2023, ended higher at Rs 92.88 from previous close of Rs 91.79 Yields on the security softened to 8.23 per cent from the previous close of 8.47 per cent.
The call money rate, rate at which banks borrow from each other for short-term funding, closed flat from Wednesday’s close of 10.25 per cent.
Comments
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.