The rupee closed weaker at 61.83 against the dollar as the American currency gained in strength, after some noise in the market that the US Federal Reserve might begin to roll back its $85 billion-a-month stimulus programme. The currency is likely to fall further on Friday as government data showed that factory output contracted 1.8 per cent in October and retail inflation accelerated to 11.24 per cent in November.

The Indian unit opened at 61.60 from Wednesday’s close of 61.24. The dollar was seen gaining against all the world’s major currencies. An end of tapering, even partially, signals the end of easy money that was getting pumped into the financial system. Some of these dollars found their way to Indian shores. The Federal Open Markets Committee will meet on December 17 and 18 in Washington, when it will announce its intention to either continue with the stimulus programme or begin to wind it down slowly. The RBI has assured that the Indian economy is “relatively” well placed now to handle the tapering, were it to come soon. On similar tapering fears in August, the rupee had touched a life-low of 68.80. Subsequently, measures by the RBI to attract more dollars and by the government to cut the current account deficit had lifted the rupee.

According to analysts, the Federal Reserve may put off tapering at least for a month more, pending the imminent end of term of Chairman Ben Bernanke in January.

Intraday, the rupee moved between 61.48 and 61.90, respectively.

Call rates dip; G-Sec flat

The inter-bank call money rate, the rate at which banks borrow from each other to meet their short-term requirements, closed lower at 6.85 per cent from the previous close of 7 per cent. The 10-year benchmark 7.16 per cent government security, which matures in 2023, closed almost flat at Rs 87.42 from the previous close of Rs 87.45. Yield on the security was 9.18 per cent (9.17 per cent on Wednesday).

(This article was published on December 12, 2013)
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