The rupee ended a tad stronger at 62.36 against the dollar due to dollar flows into the debt and equity market.

The currency unit appreciated to 61.88 a dollar, its highest since November 6, in the afternoon trading session due to increased selling of the US currency and strong foreign investor inflows into the market.

The unit opened 22 paise higher at 62.18 a dollar against the previous close of 62.40. The rupee had strengthened by 71 paise logging its biggest gain in about one-and-a-half months on Monday. However, most of its gains on Tuesday were pared due to persistent dollar demand from state-run oil companies and other importers.

Reserve Bank of India Governor Raghuram Rajan had recently said that most of the dollar demand of oil companies is being routed back through the forex market instead of the special swap window opened after the rupee slumped to its life low in late August.

Also, China central bank chief’s comments that the country will gradually expand the yuan trading band to help make the currency more flexible and market-driven, boosted the Asian markets thereby helping the rupee, dealers said.

Call rates, G-secs

The overnight call money rate, the rate at which banks borrow short-term funds from each other, ended slightly higher at 8.80 per cent against Monday’s close of 8.75 per cent. Yield on the 10-year benchmark government security, 7.16 per cent maturing in 2023, softened a tad to 9 per cent. The yield on the widely traded 8.28 per cent security, maturing in 2027, ended softer at 8.99 per cent from Monday’s close of 9.09 per cent.

Finance Minister P. Chidamabaram said, “The interest rates in G-Secs has risen temporarily, but we hope that some measures the RBI will take and the next set of inflation figures that come…it would moderate and the yields on G-Secs will come down.”

(This article was published on November 19, 2013)
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