Rupee closes stronger against US dollar ahead of Fed meet
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Mumbai: The Indian rupee on Tuesday closed stronger against the US dollar while 10 year bond yield fell to its four-month low after falling inflation and industrial production data boosted sentiments among the traders that Reserve Bank of India (RBI) may cut key rates in its August meetings.
Few analyst expects that the RBI may cut before its August meeting.
The rupee closes at 64.34, up 0.16% from its Monday’s close of 64.44. The rupee opened at 64.44 a dollar and touched a high and a low of 64.34 and 64.49 respectively.
The 10-year bond yield closed at 6.494%—a level last seen on 7 February, compared to its previous close of 6.517%. Bond yields and prices move in opposite directions.
Retail price inflation, as measured by the Consumer Price Index, slowed to 2.18% in May from 2.99% a month ago as food prices started falling from their year-ago level. IIP slowed to 3.1% in April from 3.8% a month ago.
“Lower inflation and unexciting growth print raises the risk of a rate cut in the RBI’s August monetary policy review,” said Pranjul Bhandari, Chief India Economist, HSBC
Traders are cautious as the Fed is scheduled to announce its policy decision on Wednesday where it is expected to raise its benchmark interest rate for the second time this year. Policy makers in Japan, Switzerland and Britain are also scheduled to weigh decisions this week.
So far this year, the rupee has gained 5.71%, while foreign investors have bought $7.66 billion and $12.89 billion in local equity and debt markets, respectively.
The benchmark Sensex index rose 0.03% or 7.79 points to closed at 31,103.49. Year-to-date, it has gained 17%.
Asian currencies were trading higher. Thai baht was up 0.22%, Malaysian ringgit 0.2%, Indonesian rupiah 0.11%, China offshore 0.1%, Singapore dollar 0.08% and Philippines peso 0.07%. However, South Korean won was down 0.12%, Taiwan dollar 0.04% and Japanese yen fell 0.04%.
The dollar index, which measures the US currency’s strength against major currencies, was trading at 97.244, up 0.11% from its previous close of 97.138.