LM:Rupee gives up some gains against dollar after inflation data
Mumbai: The Indian rupee gave up some of its early gains against the US currency on Thursday as dealers adjusted their dollar positions noting an intra-day decline in local stocks.
The rise in bond yields after government data showed wholesale-price inflation accelerated led to dealers buying back their dollars.
At 3.10 pm, the Indian currency was trading at Rs.63.1850 per dollar, up 0.21% from its previous close of 63.32.
The yield on the 10-year benchmark bond rose from 8.92% earlier in the day to touch a high of 9% after wholesale-price inflation quickened to 7% in September and inflation in August was revised higher to 6.99% from 6.1% earlier.
Earlier, the rupee had opened at Rs.63.1550 a dollar and touched a high of Rs.62.94 per dollar buoyed by a statement by Reserve Bank of India governor Raghuram Rajan on Wednesday in which he said that there has been “significant progress” in curbing the current account deficit in this fiscal because of a 13.5% rise in exports and a 14.5% drop in imports in October.
“Our estimate is that the current account deficit for this year will be about $56 billion, less than 3% of gross domestic product (GDP) and $32 billion less than last year,” Rajan said.
“The rupee recovered its losses after the governor’s statement on Wednesday and that momentum continued today,” said a dealer with a foreign bank adding that overnight comments by Janet Yellen, the US president’s nominee for the US Federal Reserve chairmanship, have doused fears of a immediate pull out of the US central bank’s $85 billion per month bond-buying programme.
In a testimony before her nomination hearing to the Senate Banking Committee on Friday, Yellen said the economy and labour market are performing “far short of their potential” and must improve before the Fed can begin reducing monetary stimulus.
“A strong recovery will ultimately enable the Fed to reduce its monetary accommodation and reliance on unconventional policy tools such as asset purchases. I believe that supporting the recovery today is the surest path to returning to a more normal approach to monetary policy,” Yellen was cited as saying by Bloomberg.
Yellen’s comments supported local stocks with BSE’s benchmark Sensex touching a high of 20,568 points. It later gave up some gains to trade at 20,410.71 points, up 1.07%.
Since January, the rupee has weakened 12.96% and has lost the third most after Indonesian rupiah and Japanese yen among Asian currencies during that period.
