Despite Reserve Bank of India’s measures to restrict the amount of money that companies and individuals can remit outside the country and allowing banks to pay more interest on non-resident Indian deposits, the rupee breached the crucial 62 to the dollar mark on Friday.

The benchmark BSE Sensex crashed by 3.97 per cent at the end of the session on Friday due to fresh concerns over US monetary stimulus withdrawal which weighed on the domestic currency.

According to S. Srinivasaraghavan, Head-Treasury, Dhanlaxmi Bank, “The heavy FII outflows from the domestic equity market weighed on the currency. There was high demand for dollar from importers as the currency market was closed for Independence Day and will remain closed over the weekend.”

The domestic unit opened at 61.36 and ended at an all-time low of 61.66. In intra-day trades, the currency touched a record low of 62.02 and a high of 61.32.

Market players say the continuous slide in the rupee can only be halted if the Government hikes the import duty on non-essential goods such as mobile phones and electronic items. Kuntal Sur, Director at KPMG India, said: “Overall, the market is in a state of panic and is moving on negative cues. Also, the measures announced by the RBI have not really taken the desired effect as they are more ad hoc in nature and not structural.”

Call rate slips, bond yields rise

The call money rates, rate at which banks borrow from each other for short term funding, ended lower at 10.20 per cent from the previous close of 10.22 per cent.

The benchmark 7.16 per cent government security, which matures in 2023 ended sharply lower at Rs 88.89 from its previous close of at Rs 91.22. Yields hardened sharply to 8.88 per cent from 8.49 per cent.

deepa.nair@thehindu.co.in

(This article was published on August 16, 2013)
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