The rupee was holding steady against the dollar on Wednesday, as healthy gains for the local shares offset strength in the US currency in the overseas markets. The yen strengthened against the euro and the dollar snapped a two-day loss versus the shared currency of the euro-zone.
At 11:40 am (IST), the partially-convertible Indian currency was trading at 46.67 after moving in a tight range of 46.60 to 46.70. It opened at 46.63 against the previous close of 46.64/65.
The rupee gained 0.3% yesterday, the most in two weeks, amid optimism that overseas investors will continue to pour money into Indian equities and bonds as the economy remains on a strong footing despite a worsening global outlook.
Meanwhile, in global currencies, the yen climbed to 109.74 per euro as of 1:40 p.m. in Tokyo from the 110.19 close in New York. It yesterday touched 109.07, the strongest since July 1. Japan’s currency gained to 85.44 per dollar from 85.53. The greenback strengthened to US$1.2844 per euro from US$1.2885.
The Dollar Index rose for the first time in three days on speculation that US economic reports this week will signal that the world’s biggest economy will avoid a double-dip recession. The Dollar Index, which tracks the greenback against the currencies of six major trading partners, rose 0.3% to 82.381.
The BSE Sensex was at 18,140, up 91 points or 0.5% from the previous close. It had earlier been as high as 18,159 and as low as 18,067. The NSE Nifty was up 33 points at 5,447 after touching a high of 5,454 and a low of 5,416. It had opened at 5,416.
The Indian currency pared gains yesterday after Commerce Secretary Rahul Khullar said that India’s exports grew in July at the slowest pace in six months. Overseas shipments rose by 13.2% from a year earlier to US$16.24bn after a 30.4% gain in June, Khullar told reporters in New Delhi today.
Exports may slow in the coming months as the global economic recovery falters, he said.
So far in 2010, foreign funds have invested a net US$11.7bn in local shares, in addition to last year's record US$17.5bn investment when the rupee had risen 4.7%. But, due to the inconsistency of flows this year, the rupee has not appreciated much despite the inflows. The local unit is slightly weaker on the year.
Separately, India’s bond prices fell, driving 10-year yields to a three-month high amid concerns that the RBI will maintain a hawkish stance on its monetary policy due to high inflation. Bond prices dropped for a third day, the longest losing streak in more than two weeks, before the government’s Rs120bn sale of debt on Aug. 20.
The yield on the 7.80% note due in May 2020 rose three basis points, to 7.91%. The price fell 21 paise per Rs100 face value, to Rs99.22.
India’s sale of bonds maturing in 2017, 2022 and 2040 in two days is part of the government’s record Rs4.57 trillion borrowing program for the fiscal year that began April 1.
Inflation, based on the wholesale-price index (WPI) rose 9.97% from a year earlier in July, after a 10.55% gain in June, the Government reported on Aug. 16, dipping below 10% for the first time in six months. The RBI estimates inflation to ease to 6% by the end of the fiscal year in March.
