Rupee closes higher against US dollar on softer inflation
Mumbai: The Indian rupee on Tuesday closed stronger against US dollar after better-than-estimated inflation data eased fears of near-term interest rate hikes by the Reserve Bank of India (RBI).
The rupee closed at 64.90 a dollar, up 0.23% from its previous close of 65.05. The home currency opened at 64.93 a dollar and touched a high and a low of 64.84 and 65.01 respectively.
Bond yield pared all the losses and closed marginally higher. Yields on 10-year government bonds ended at 7.656% compared to Monday’s close of 7.630%. Bond yields and prices move in opposite directions.
Retail inflation surprisingly slowed for the second consecutive month to 4.4% in February from 5.1% in January and 5.2% in December. Factory output grew at a robust pace for the third straight month, at 7.5% in January.
“The RBI faces less pressure to shift gears to a hawkish stance at the upcoming April review, with a similar tone to extend into June as well. For 2018, our expectations of a prolonged pause stays,” said Radhika Rao, economist of DBS Bank Ltd.
According to CRISIL, it expects the repo rate to remain unchanged over the next six months unless significant upside risks to the monetary policy committee’s inflation forecast materialize.
India’s benchmark Sensex index fell 0.18%, or 61.16 points, to 33,856.78. So far this year, Sensex has fallen 0.5%.
Year to date, the rupee has weakened 1.6%, while foreign investors have bought $414.20 million and $212.20 million in equity and debt markets, respectively.