BackRupee closes marginally lower at 61.87 per dollar
The local currency opened at 61.89 per dollar and touched a high and a low of 61.81 and 61.99 a dollar, respectively
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Mumbai: The rupee closed marginally lower against the US dollar on Monday as the greenback strengthened against major global peers in reaction to the interest rate cut by China on the weekend.
Dollar demand from state-owned banks, most likely on behalf of the Reserve Bank of India (RBI), also kept the rupee under pressure.
The home currency closed at 61.87 per dollar, down 0.05% from the previous close of 61.84. The local unit opened at 61.89 per dollar and touched a high and a low of 61.81 and 61.99, respectively.
“The dollar’s strength has been the main reason for the rupee’s weakness. But there are also inflows in the market which are being absorbed by state-owned banks," said a dealer with a US bank.
The dollar index, which measures the US currency’s strength against a basket of currencies, touched 95.50 on Monday, its highest level since September 2003, as an interest rate cut by China on Saturday put that country’s slow economic recovery under the spotlight. The resultant weakness in other Asian currencies also affected the rupee.
The yield on India’s 10-year benchmark bond closed at 7.743% compared with its Friday’s close of 7.728% in reaction to Saturday’s budget announcement which increased the fiscal deficit target to 3.9% of gross domestic product (GDP) against market estimates of 3.6% to 3.8% of GDP. Bond yields and prices move in opposite directions.
“Yields have inched up but there is still widespread expectations that the RBI (Reserve Bank of India) will cut rates further in April which is why yields have not taken a tumble," said the dealer quoted above.
Bond yields are likely to inch up after finance minister Arun Jaitley on Saturday said he will achieve the fiscal deficit target of 3% by 2017-18, a year later than schedule, citing an increase in public spending required to support economic growth.
Since the beginning of this year, the rupee has gained 1.90%, while foreign institutional investors have bought $3.87 billion from the local equity markets and $5.45 billion from the bond markets.
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