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The rupee had opened at 61.49 per dollar and touched a high and a low of 61.37 and 61.51, respectively, in intra-day trade. Photo: Mint
The rupee had opened at 61.49 per dollar and touched a high and a low of 61.37 and 61.51, respectively, in intra-day trade. Photo: Mint

Rupee closes little changed on dollar demand from state-owned banks

The rupee closes at 61.41 per dollar, up 0.04% from its previous close of 61.44

Mumbai: The rupee was little changed against the US currency on Tuesday as dollar inflows from foreign institutional investors (FIIs) were being absorbed by demand from state-owned banks.

The rupee closed at 61.41 per dollar, up 0.04% from its previous close of 61.44. It had opened at 61.49 per dollar and touched a high and a low of 61.37 and 61.51, respectively, in intra-day trade.

India’s benchmark S&P BSE Sensex closed up by 1%, or 292.20 points, at a new high of 29,571.04 points, while the Nifty closed 0.85%, or 74.90 points, higher at a record 8,910.50 points.

“There are inflows from FIIs today, but demand from state-owned banks is matching it, which has prevented the rupee from rising," said a dealer with a foreign bank. He expects the rupee to trade in the 61.38-61.48 per dollar range.

Why state-owned banks were buying dollars was unclear. Normally, state-owned banks buy dollars to meet payment requirements for domestic oil companies or they buy on behalf of the Reserve Bank of India (RBI) to prevent the rupee from rising sharply.

The yield on India’s 10-year benchmark bond closed at 7.707% compared with its Friday’s close of 7.702%. Bond yields and prices move in opposite directions.

Since the beginning of this year, the rupee has strengthened 2.66% against the dollar. Foreign institutional investors have bought $1.24 billion during the period from local equity markets and bought $2.91 billion from debt markets.

The dollar index, which measures the US currency’s strength against major currencies, was trading at 94.71, down 0.10% from its previous close of 94.802.

The US Federal Reserve starts a two-day policy meeting on Tuesday which will be keenly watched by investors as it is the first such meeting after last week’s multi-billion dollar bond buying announced by the European Central Bank (ECB) and easier policies announced earlier by Canada and Switzerland.

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