WSJ:Indian Rupee Recovers From Nine-Month Low On Dollar Selling
As Of 1200 GMT
Latest Change
USD/INR 45.66 -0.08
7.80% 2021 Bond 8.27% +1BPs
Call Rate 8.05% -5BPs
Forward Dollar Premium/Discount*
July 1.48 +0.22
*Forward Dollar Premium/Discount are midpoints of bid-offer spreads
MUMBAI (Dow Jones)--The Indian rupee recovered from a near nine-month low against the U.S. dollar Monday due to heavy late-session dollar selling by a clutch of foreign banks, in a possible indication the greenback's rally of the past few weeks may be petering out.
The U.S. dollar was at INR45.66 late Monday, compared with INR45.74 late Thursday. The dollar touched an intraday high of INR46.09, a level last seen on Nov. 30. The local currency markets were shut Friday for a public holiday.
"The correction was driven by a few foreign banks, including a large British bank, a large American bank, and a large European bank, that have been piling in on the sell side with a large supply of dollars today," said the trading head at a private bank.
In early trade, the local currency wilted against the dollar due to a surge in demand for the greenback, primarily from oil importers, following a holiday-truncated trading period last week.
Indian banks have been buying the greenback on behalf of oil importers in the past few weeks to settle previous import dues with Iran.
Indian refiners' dues towards Iran rose to more than $5 billion after the South Asian nation's central bank scrapped a longstanding clearing mechanism in December, which the U.S. says Tehran could use to finance its alleged nuclear weapons program.
In the debt market, Indian sovereign bonds gave up early gains and ended lower Monday due to some profit-taking and widespread belief in the market that the Reserve Bank of India is unlikely to change its anti-inflationary stance in the near future.
The 7.80% 2021 benchmark bond ended at INR96.94, falling from an early session high of INR97.32 and compared to Thursday's close of INR97.00.
At separate events last week, the central bank's two deputy governors said controlling inflation remains a top concern--indicating the central bank remains watchful of price pressures.
The RBI has raised its lending rate 11 times since March 2010 by a cumulative 3.25 percentage points.
However, dealers said the bonds are unlikely to fall further during the week as the size of the debt sale is likely to be lower this week.
"Liquidity seems comfortable, being the second week of the reporting fortnight and only INR270 billion worth of approximate outflow through central and state papers issuances," said Shakti Satapathy, fixed-income analyst at A.K Capital.
