Rupee closes at three week high against US dollar
Mumbai: The Indian rupee on Thursday closed three week high against the US dollar and 10-year-bond yield fell to four month low, a day after Reserve Bank of India (RBI) kept key rates unchanged.
The rupee closed at 64.21—a level last seen on 17 May, up 0.18% from its Wednesday’s close of 64.33. The rupee opened at 64.40 a dollar and touched a high and a low of 64.21 and 64.43 respectively.
The 10-year bond yield closed at 6.532%—a level last seen on 7 February, compared to its previous close of 6.567%. Bond yields and prices move in opposite directions.
The Reserve Bank of India’s (RBI) monetary policy committee (MPC) on Wednesday kept key interest rates unchanged, but cut inflation forecasts sharply.
For the first half of fiscal year 2017-18 (April-September), CPI (consumer price index) inflation is now seen at 2.0-3.5% and for second half at 3.5-4.5%. This marks a revision from 4.5% and 5.0% estimated earlier, respectively. It cut statutory liquidity ratio by 50 basis points to 20%.
“We believe RBI can ease rates by 25bps with a room for one more cut if the current disinflationary forces persists. The positive outlook on monsoon, stable exchange rate & moderate international oil prices should pave the way for such an outcome” said Kunal Shah, fund manager, debt, Kotak Mahindra Old Mutual Life Insurance Limited.
“Bond markets will take the dovish guidance positively and yields should drift lower, we see 10y bond yields to trade within 6.40-6.70% band in the near term. High real rates will keep bond markets attractive for a while,” Shah added.
The benchmark Sensex index fell 0.19% or 57.92 points to closed at 31,213.36. So far this year, it has gained 17.14%.
So far this year, the rupee has gained 5.6%, while foreign investors bought $7.83 billion and $11.28 billion in local equity and debt markets, respectively.
Asian currencies were trading lower. Japanese yen was down 0.25%, Malaysian ringgit 0.18%, China Offshore 0.13%, Philippines peso 0.06%. However, South Korean won was up 0.18%.
The dollar index, which measures the US currency’s strength against major currencies, was trading at 96.719, down 0.03% from its previous close of 96.748.