Mumbai: The rupee held on to its gains against the dollar on persistent sales of the US currency by banks and exporters, tracking the dollar’s weakness against Asian currencies overseas.
At 2.30pm the Indian currency was trading at 58.87 per dollar, up 0.40% from Thursday’s close of 59.11. It touched an intra-day high of 58.70 to the dollar earlier in the day, its strongest level since 19 June.
“The Reserve Bank of India (RBI) measures seem to have worked,” said Hariprasad M.P., head of treasury at Centrum Direct Ltd. “The squeeze in rupee liquidity has forced banks to sell dollars in favour of the rupee and also invited exporters to sell dollars, which has pushed up the Indian currency,” Hariprasad said.
The rupee has risen more than 0.72% this week, after plunging to an all-time low of 61.21 per dollar on 8 July. RBI curtailed the amount of money banks can borrow from the daily repo window on Tuesday.
The measures have led to a rise in short-term yields. On Thursday, RBI sold Rs.2,200 crore of 28-day cash management bills at 11.18%, while Rs.3,000 crore of 56-day bills were sold at 11.20% yield.
The yield on the 10-year 7.16% bond maturing in 2023 has corrected to 8.17% after rising to 8.42% on Wednesday.
Hariprasad of Centrum said that although RBI’s moves have worked, further measures are needed.
“Macro-economically we are still under pressure because the current account deficit is still high. Raising rates is only a short-term option because growth has slowed. I expect other measures like a sovereign bond issue to attract long-term dollar inflows,” Hariprasad said.
