Rupee, bond prices gain as RBI, government hint truce
At 9.15am, the rupee was trading at 71.33 a dollar, up 0.45% from its Tuesday’s close of 71.66. The currency opened at 71.48 a dollar
Mumbai: The Indian rupee on Tuesday strengthened for the sixth consecutive session against US dollar, its longest winning streak since October 2017, on the hopes that the Reserve Bank of India and the government managed to meet at a middle ground on some of issues. At 9.15am, the rupee was trading at 71.33 a dollar, up 0.45% from its Tuesday’s close of 71.66. The currency opened at 71.48 a dollar. The 10-year government bond yield stood at 7.763% from its previous close of 7.791%. Bond yields and prices move in opposite directions.
Decisions were taken on capital adequacy of banks, while two contentious issues of transfer of surplus reserves and relaxing norms for weak banks were referred to committees. The board has also advised RBI to let banks recast loans up to Rs 25 crore given to micro, small and medium enterprises (MSMEs).
“Easing tensions between the RBI and the government is likely to be positive for INR assets, particularly as the central bank is seen to retain its operational autonomy. Kneejerk gains in bonds are likely, before returning to familiar drivers particularly in midst of the sharp overnight sell-off in the US markets”, said Radhika Rao, economist at DBS Bank.
The benchmark Sensex Index rose 0.16% or 56.75 points to 35,831.63 points. Year to date, it has rose 5.04%.
So far this year, the rupee has declined 10.5%, while foreign investors have sold $5.18 billion and $7.57 billion in the equity and debt markets, respectively.
Most Asian currencies traded lower as investors weighed pessimism about the chance of a quick resolution to the trade war against signs the Federal Reserve may be turning less hawkish.
Philippines peso was down 0.15%, Thai Baht 0.08%, Japanese yen 0.04%, China Offshore 0.04%. However, South Korean won was up 0.17%, Indonesian rupiah 0.16%, Malaysian ringgit 0.08%, Singapore dollar 0.07%.
The dollar index, which measures the US currency’s strength against major currencies, was trading at 96.218, up 0.03% from its previous close of 96.193.
Bloomberg contributed to this story
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