Rupee strengthens 0.11% against the dollar1 min read . Updated: 27 Jul 2013, 12:13 AM IST
Dollar selling by banks and exporters helped the currency, which closed at 59.04 per dollar
Mumbai: The rupee ended higher against the dollar on sales of the US currency by banks and exporters and tracking the dollar’s weakness against Asian currencies overseas.
The Indian currency ended at 59.04 per dollar, up 0.11% from Thursday’s close of 59.11. It touched an intra-day high of 58.70 to the dollar earlier in the day, its strongest level since 19 June. The Indian currency has recovered from a low of 59.90 on Monday.
“The Reserve Bank of India (RBI) measures seem to have worked," said Hariprasad M.P., head of treasury at Centrum Direct Ltd. “The squeeze in rupee liquidity has forced banks to sell dollars in favour of the rupee and also invited exporters to sell dollars, which has pushed up the Indian currency," Hariprasad said.
The rupee has risen 1.22% since Wednesday, after plunging to an all-time low of 61.21 per dollar on 8 July. RBI curtailed the amount of money banks can borrow from the daily repo window on Tuesday.
“Month end dollar demand from importers cushioned the rise in the rupee. During this month, the net portfolio outflow was at $3.15 billion ($1.03 billion equity and $2.12 billion of debt). In the next one month we see the rupee trade in the ₹ 58.50 to ₹ 59.75 per dollar range," said Param Sarma, director and CEO at NSP Treasury Risk Mangement Services Pvt. Ltd in a note on Friday.
The RBI measures have led to a rise in short-term yields. On Thursday, RBI sold ₹ 2,200 crore of 28-day cash management bills at 11.18%, while ₹ 3,000 crore of 56-day bills were sold at 11.20% yield.
The yield on the 10-year 7.16% bond maturing in 2023 fell to 8.16% after rising to 8.42% on Wednesday.
Hariprasad of Centrum said that although RBI’s moves have worked, further measures are needed.
“Macro-economically we are still under pressure because the current account deficit is still high. Raising rates is only a short-term option because growth has slowed. I expect other measures like a sovereign bond issue to attract long-term dollar inflows," Hariprasad said.