Mumbai: The Indian rupee fell against the US dollar and bond yields surged in afternoon trade, tracking weakness in the local equity markets and Asian currencies and concerns of a tight monetary stance from the Reserve Bank of India (RBI) going ahead. Sentiments were down in the financial markets due to mounting pessimism that interest rates may stay high in the economy for a longer than expected period if the central bank chooses to accept retail inflation as the key price indicator for policy formulation as suggested by an expert panel, dealers said. The Reserve Bank of India (RBI) is set to announce its third quarter monetary policy review next Tuesday and some economists expect the apex bank to keep interest rates unchanged as inflation still remains high. The partially convertible Indian rupee closed at 62.66 , down 1.17%, compared with its previous close of 61.93. The unit fell to 62.38 in intra-day trade or 0.72% from the last close—a level last seen on 29 November. Since the beginning of this year, the rupee has lost 0.68% against dollar and has recovered better than its Asian peer, according to data from Bloomberg. Foreign institutional investors have poured in $443.4 million in the local equity markets so far this year while in the previous year they bought equities worth $20 billion. Bond yields surged. The yield on India’s 10-year benchmark bond is trading at 8.721% from previous close of 8.672%. Bond yields and prices move in opposite directions. The dollar index, which measures the US currency’s strength against major currencies, trading at 80.407, down 0.04% from the previous close of 80.438. Stocks were trading down. The 30-share bellwether equity index, Sensex, on BSE ended 1.12% down at 21,133.56 points while the National Stock Exchange’s broader 50-share index—Nifty,closed 1.24% down at 6,266.75 points.

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