Rupee recovers from nine-month low against dollar - Livemint

Dealers avoided taking long positions ahead of the Reserve Bank of India’s bi-monthly monetary policy. Photo: Mint

Mumbai: The Indian rupee erased all its early losses, and closed little changed against the dollar on Monday, as dealers avoided taking long positions ahead of the Reserve Bank of India’s (RBI’s) bi-monthly monetary policy due on Tuesday.

Earlier in the day the rupee weakened to 62.24 per dollar—a level last seen on 20 February 2014 due to RBI’s relaxation on gold imports which put some pressure on the exchange rate owing to concerns that the current account deficit will widen again.

“Indian rupee weakened to a fresh nine-month lows of 62.24 levels spot, as government eased the curbs on gold imports and economic growth for second quarter was weak. However, exporter selling and FII sales brought the rupee down towards 62 levels by the close of day,” said Anindya Banerjee, currency analyst, Kotak Securities Ltd .

The rupee closed at 62.02, up 0.01% from its previous close of 62.03.

India’s benchmark equity index, BSE Sensex, ended at 28,559.62 points on BSE, down 0.47%.

Most of the Asian currencies ended lower. The Malaysian ringgit weakened 1.5%, Indonesian rupiah 0.61%, South Korean won 0.50%, Taiwan dollar 0.32%, while Singapore dollar shed 0.18%.

So far this year, rupee has weakened 0.36% against the dollar while while foreign institutional investors have bought $15.88 billion during the period from local equity markets.

Bond yield fell to a 16-month low after international crude oil prices fell to four-year lows, which eased fiscal deficit and inflation concerns and raised hopes that RBI may cut rates.

However, Mint poll expects that RBI is unlikely to cut rates in the policy review on 2 December. A survey of 10 economists and bank treasurers showed that no one was expecting an immediate cut in interest rates, instead they expect RBI governor Raghuram Rajan to wait until there is more clarity on the inflation trajectory and global developments such as commodity prices and monetary policy in the US.

The yield on India’s 10-year benchmark bond closed at 8.061%, compared with its Friday’s close of 8.087%. The 10-year bond touched a low of 8.039%—a level last seen on 30 July 2013. Bond yields and prices move in opposite directions.

The Reserve Bank of India (RBI) on Monday sold Rs.12,341 crore of bonds as part of its open market operation (OMO). The plan was to sell up to Rs.12,000 crore against which bids worth Rs.27,816 crore were received, RBI’s website showed.

The dollar index, which measures the US currency’s strength against major currencies, was trading at 88.033, down 0.36% from the previous close of 88.356.