Rupee appreciated further on Thursday adding 106 paise to 66.01 against the dollar, after steps taken by new RBI governor Raghuram Rajan to attract US currency inflows boosted market sentiment.
To support the rupee, Rajan had on Wednesday announced steps such as enhanced limits for exporters to re-book cancelled forward exchange contracts and a special concessional window to swap foreign currency non-resident (FCNR) deposits. The rupee started the day strong at 66 a dollar from the previous close of 67.07 at the interbank foreign exchange market and moved in a range of 65.54 to 66.52 before ending at 66.01, a rise of 106 paise or 1.58%. Yesterday, it had risen 56 paise.
?Rupee benefitted with a slew of constructive announcements from the new RBI governor,? said Anindya Banerjee, currency analyst at Kotak Securities. ?However, the dollar bounced back as demand from importers surfaced.? Rupee also got support as Rajan?s near-term agenda boosted stocks, with the benchmark S&P BSE Sensex shooting up 412.21 points or 2.22%. Foreign institutional investors bought a net R172.53 crore of shares on Wednesday, as per provisional data with the stock exchanges.
Rajan announced plans to revise and strengthen the monetary policy framework and stressed the need for faster, broad-based, inclusive growth, among other steps.
Still, concerns remain about high inflation, growth slowdown, current account deficit and expectations of the US Federal Reserve easing its stimulus programme, said Pramit Brahmbhatt, CEO of Alpari Financial Services (India). ?To stabilise the rupee, we need to focus more on export revenue and inward remittances. Until that happens, the central bank can intervene through borrowed funds, but we can?t sustain that kind of stability,? said Brahmbhatt. ?The trading range for the spot USD-INR pair is expected to be within 65.50 to 67.00.?
Bonds give up gains on profit booking
Mumbai, Sept 5: Government bonds fell on Thursday as an uptick in US Treasury yields sparked profit-taking after prices rallied in the morning in a knee-jerk reaction to the slew of measures announced by new RBI chief Raghuram Rajan.
The rupee rallied and shares surged after Rajan late on Wednesday unveiled measures to support the ailing currency, providing a shot of confidence for investors unnerved by the country?s economic crisis. The 10-year bond yield closed up 3 basis points at 8.42%. Traders said rupee?s retreat from the session?s highs was also a reason for the rise in yields. In the overnight indexed swap market, the benchmark 5-year swap rate closed down 11 bps at 8.42% and 1-year rate closed down 21 bps at 9.27%.
