Mumbai: The rupee climbed to a fresh nine-year high and bond yields fell on Tuesday, after the central bank left interest rates steady in its monetary policy.
At 1:15 p.m, the partially convertible rupee was at 41.27/29 per dollar, off a peak of 41.15, its highest level since May 1998. It was quoted at 41.54/55 ahead of the policy and had ended at 41.67/68 on Monday.
“Stop-losses got triggered once the 41.50 level was broken and exporters were selling dollars heavily. Robust capital inflows have helped the rupee,” a private bank trader said.
Traders said they were relieved the central bank did not tighten capital controls, and should encourage foreign inflows in equities and boost overseas investment in Asia’s fourth-biggest economy.
Foreign funds have bought a net $972 million (Rs4,000 crore) of Indian shares this month and nearly $2.6 billion in 2007. They had bought nearly $8 billion last year.
The yield on the benchmark 10-year bond fell to 8.0%, from 8.07% beforehand. It ended at 8.10% on Monday. Traders said the central bank’s rate decision was on expected lines.
The rupee is up 7% this year — the best performing Asian currency against the dollar. The next best performer is the Thai baht, with a rise of about 3.6%.
The rupee has risen about more than 5% this month, and is trading nearly 14% above a three-year low of 47.04 hit last July.
According to a JPMorgan index, the rupee is overvalued by nearly 14%, compared with about 8.5% a month ago.