LM:Indian rupee closes at 63.37 per dollar ahead of Fed meet
Mumbai: The rupee weakened against the dollar in thin trade on Tuesday on light demand for dollars from importers even as persistent dollar selling by exporters and foreign institutional investors (FIIs) supported the Indian currency.
The rupee closed at 63.37 per dollar, down 0.83% from the previous close of 62.8475 per dollar. It opened at 63.3350 per dollar and touched a high and a low of 62.96 and 63.64 per dollar, respectively.
Trade was thin as dealers avoided taking dollar positions ahead of the two-day US Federal Open Market Committee (FOMC) meeting on Wednesday.
Expectations are that the US Fed will announce a plan to prune its $85 billion per month purchase of US securities.
Aman Mahna, dealer at FirstRand Bank Ltd, said he expects trade to remain thin between now and Thursday, till the Fed’s decision becomes clear.
“Even the Reserve Bank of India (RBI) policy is based on what the Fed will do. If the Fed says that they will prune the bond buying by $5 billion to $10 billion, then I think the market can adjust to that. Cutting the bond buying is imminent but all eyes are on how much they cut it by,” Mahna said.
Locally the rupee has been supported by a renewed interest by foreign institutional investors (FIIs) in the stock market, the fact that demand from oil companies has been taken off market and expectations that dollar inflows will come through non-resident Indians after a special swap facility was announced by RBI earlier this month.
These measures have helped the Indian currency gain 8.6% in the last two weeks and recover from an all time low of 68.85 per dollar touched on 28 August.
However, since January this year, the rupee has weakened 13.22% and has lost the most among Asian currencies during that period.
Mahna said he expects the rupee to trade in the 62.80 to 63.50 per dollar band in the next couple of days ahead of the Fed meet.
The dollar index, which measures the greenback’s strength against major currencies, was trading at 81.152, down 0.18% from the previous close of 81.295.
India’s benchmark Sensex gained 0.31%, or 61.56 points, to 19,804.03.
The yield on the 10-year bond stood at 8.446%, up 0.12% from previous close of 8.436%. It had opened at 8.470% and touched a high and a low of 8.470% and 8.339%, respectively.
The overnight call money rate stood at 10.25%, up 0.49% from previous close of 10.20%. It opened at 10.55% and touched a high and a low of 10.60% and 10.15%, respectively.
