Active Stocks
Tue Mar 19 2024 14:41:10
  1. Tata Consultancy Services share price
  2. 3,987.05 -3.80%
  1. Tata Steel share price
  2. 149.80 0.13%
  1. Bharti Airtel share price
  2. 1,235.50 0.85%
  1. Power Grid Corporation Of India share price
  2. 260.60 -1.66%
  1. ITC share price
  2. 410.00 -1.77%
Business News/ Market / Stock-market-news/  Rupee closes at 66.12 per dollar as Rajan moves lift sentiment
BackBack

Rupee closes at 66.12 per dollar as Rajan moves lift sentiment

The rupee touches an intra-day high of 65.5275 per dollar; Sensex soars 412 points as investors regain a measure of confidence

Since January this year, the rupee has weakened 16.82% and has lost the most among Asian currencies during. Photo: Pradeep Gaur/Mint (Pradeep Gaur/Mint)Premium
Since January this year, the rupee has weakened 16.82% and has lost the most among Asian currencies during. Photo: Pradeep Gaur/Mint (Pradeep Gaur/Mint)

Mumbai: The rupee and equities held on to gains against the dollar on Thursday after rising sharply early in response to a slew of measures announced by new Reserve Bank of India (RBI) governor Raghuram Rajan in his first day at Mint Road on Wednesday.

After opening at 66.04 and touching an intra-day high of 65.5275, the rupee closed at 66.12 per dollar, up 1.38% from Wednesday’s close of 67.09 per dollar.

The 30-share Sensex closed 2.22%, or 412.21 points, higher at 18,979.76 points, while the broader benchmark 50-share Nifty gained 2.66%, or 144.85 points, at 5,592.95 points.

Equity markets also regained a measure of confidence as the rupee recovered its losses in response to Rajan’s steps.

In his first statement after taking over as governor, Rajan enhanced exporters’ ability to hedge their exposure through forwards contracts, allowed banks to swap their dollar deposits with the central bank at a special concessional rate of 3.5% for at least three years and permitted banks to raise 100% of their core capital from overseas.

These schemes will be open up to 30 November.

The measures were seen as rupee positive, resulting in a sharp rally by the battered currency. J. Moses Harding, executive director at private sector Lakshmi Vilas Bank Ltd said the steps were seen as being positive for “growth."

Since January this year, the rupee has weakened 16.82% and has lost the most among Asian currencies during.

The dollar index, which measures the US currency’s strength against major currencies, was trading at 82.218, up 0.06% from the previous close of 82.169.

“RBI had overemphasised on the rupee at the cost of growth through recent measures like increasing the effective overnight borrowing rate to 10.25% and using forex reserves to pay oil marketing companies. These measures have brought the focus back on growth," Harding said.

On the anvil are measures to free up financial markets, which will allow the markets to absorb some of the risks which otherwise threaten to destabilize banks. To ensure this, the markets need depth, Rajan said on Wednesday.

“We cannot create depth by banning position-taking, or mandating trading based only on well-defined legitimate needs. Money is fungible so such bans get subverted, but at some level, all investment is an act of faith and of risk-taking," said Rajan, hinting that the central bank could well be unwinding measures taken in the recent past to curb speculation in the currency markets.

“Better that investors take positions domestically and provide depth and profits to our economy than they take our markets to foreign shores," Rajan said.

Exporters were permitted to re-book cancelled forward exchange contracts to the extent of 25% of the value of cancelled contracts. The limit has now been enhanced to 50%. Importers who did not have any such facility to start with, can now dig into 25% of their cancelled contracts.

Also, the current overseas borrowing limit of 50% of the core capital of banks has been raised to 100%. Borrowings mobilized under this provision can be swapped with the RBI at the option of the bank at a concessional rate of 1 percentage point below the prevailing swap rate.

Harding said he expects the new measures to stabilise the currency at current levels. “ 68.70 per dollar looks the worst case scenario for the rupee. I expect it to be in the 63 per dollar to 65 per dollar range from here," he added.

The yield on the 10-year bond ended trading at 8.41%, up 0.2% from previous close of 8.393%. It opened at 8.21%.

India’s overnight call money rate stood at 10.25%, unchanged from the previous close. It opened at 10.25% and touched a high of 10.35% and a low of 9.70%, respectively.

Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!

Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
More Less
Published: 05 Sep 2013, 09:27 AM IST
Next Story footLogo
Recommended For You
Switch to the Mint app for fast and personalized news - Get App