US Fed’s monetary stimulus coupled with the buzz that the government will open up foreign direct investment (FDI) in multi-brand retailing and aviation saw the rupee strengthen by 111 paise to the dollar on Friday.

The Indian unit closed at 54.31, a two-and-a-half month high, against the previous close of 55.42 dollar on the back

Opening lower at 55.85, the rupee touched an intra-day low of 55.92 in early trades. However, the weak trend reversed in the second session and the rupee hit a high of 54.30 due to expectation that the government would soon open up FDI in multi-brand retailing and aviation.

Further, hopes announcement on disinvestment in public sector undertakings supported the rupee.

The US Federal Reserve in its Thursday meeting announced that it will purchase agency mortgage-backed securities at the rate of $40 billion a month until the job market improves substantially. “Foreign exchange inflows will go up in our markets,” said NS Venkatesh, Chief General Manager and Head of Treasury, IDBI Bank.

However, domestic inflation rose more-than-expected in August at 7.55 per cent against July’s 6.87 per cent, further denting hopes of an interest rate cut by the Reserve Bank of India in its policy review on Monday.

“This could put pressure on the rupee going forward,” Venkatesh said.

Call flat, bonds rise

The overnight call money rates ended flat at 8 per cent. The rates had moved in the 7.90 to 8.05 per cent range.

The 10-year benchmark 8.15 per cent government security maturing in 2022 ended higher at Rs 99.80 (yield: 8.18 per cent) from its previous close of Rs 99.76 (8.18 per cent).

The widely traded 8.33 per cent security maturing in 2026 closed slightly higher at Rs 100.18 (yield: 8.30 per cent) from a close of Rs 100.14 (yield: 8.31 per cent) on Thursday.

beena.parmar@thehindu.co.in

(This article was published on September 14, 2012)
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