Mumbai: The Indian rupee on Thursday rallied significantly and bond yields fell, boosted by an improvement in sentiment in the domestic market due to recent regulatory measures to support the currency and favourable signals from major global markets.
Besides the regulatory steps taken by the Reserve Bank of India (RBI) and Securities and Exchange Board of India (Sebi) earlier this week, comments by US Federal Reserve chairman Ben Bernanke also boosted sentiment.
On Wednesday, Bernanke said a highly accommodative monetary policy would be needed for the foreseeable future, sparking hopes that any tapering of the asset-purchase programme may not be necessarily close, Reuters reported.
The rupee opened at 59.325 against the dollar, or 0.6% up, and was trading mostly in a range 59.70-59.90 in the second half of the day. At 2.10 pm, the currency was trading at 59.885 per dollar and has recovered over 2% from its all-time low of 61.21 registered on Monday.
The rupee has lost 8.18% since January.
Yield on India’s 10-year benchmark bond fell almost 9 basis points intra-day and is currently at 7.488%, compared with the previous close of 7.51%. The benchmark Sensex is trading 1.91% up at 19,661.79 points and the broader index Nifty is 1.93% up at 5929.1 points.
The dollar index, which measures the US currency’s strength against major currencies, was trading at 82.986, down 1.26% from the previous close.
On Monday, RBI said banks “should not carry out any proprietary trading in the currency futures/exchange-traded currency options markets”. Any such trades could only be on the behalf of clients, the regulator said.
Sebi followed this up on Tuesday by raising margin requirements, or the money to be provided upfront on trades, and curtailing open positions—which limits the extent of trading—on currency derivatives starting 11 July.
