The rupee strengthened 9 paise to end at 60.84 against the dollar after the RBI reduced the statutory liquidity ratio (SLR) requirement for scheduled commercial banks by 50 basis points to 22 per cent of their NDTL with effect from the fortnight beginning August 9, 2014.
The domestic unit had ended at 60.93 on Monday.
On Tuesday, the unit opened almost flat at 60.95 against the dollar ahead of the monetary policy announcement by the RBI. It declined to 60.99 in the early morning trades after which it surged to 60.69 as the RBI met market expectations of a status quo on key policy rates. Also, the SLR reduction would infuse liquidity to the tune of Rs 40,000 crore in the banking system providing more funds with banks to lend.
Intra-day, the unit moved 30 paise at the Interbank Foreign Exchange market.
Call and Bond prices fall
The inter-bank call money rate, the rate at which banks borrow short-term funds from one another to tide over liquidity mismatches, ended at 7.25 per cent from Monday’s close of 7 per cent. Intraday, call money market moved in the range of 7.10 to 8.25 per cent range.
The BRI Governor Raghuram Rajan said the RBI is trying to keep it closer to 8 per cent. The RBI also said the average call volume in July came down by 40 per cent and hence it was a thin market, which led to more volatility.
The yield on the 10-year benchmark government bond 8.40 per cent maturing in 2024 jumped to 8.61 per cent from the previous close of 8.50 per cent. The price weakened to Rs 98.60 from Rs 99.33. Bond yields and prices move in opposite directions.