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The rupee ended weaker at 61.44 against the dollar on Wednesday due to a stronger dollar and higher inflation data signalling concerns of the slowing economy.
The domestic unit opened sharply weaker at 61.54 from its Tuesday’s close of 61.18 a dollar
Despite government measures of import duty hikes announced on Tuesday, to narrow the current account deficit (CAD), the Indian currency failed to gain support and continued to slide against the American dollar touching an intra-day low of 61.56.
Though the unit recovered to 61.29 per dollar in the afternoon trades, a stronger American currency against other foreign currencies put pressure on the rupee, a dealer said.
The RBI on Wednesday announced more measures to rationalise foreign exchange outflows by resident Indians. This could be positive for the domestic unit in the week ahead.
Further, the Finance Minister Chidambaram said it would leave no stone unturned to finance the current account deficit (CAD). “Given our deficits (fiscal and CAD), the rupee will remain under pressure,” he said in the Parliament on Wednesday.
Chidambaram defended the rupee fall saying that all major currencies have depreciated post the US central bank’s recent statements on withdrawal of quantitative easing. Also, if the rupee has fallen, the dollar too has fallen against gold, the FM said assuring that the rupee will strengthen.
The rupee has declined by 1 per cent since Monday’s announcement of government's proposals to narrow CAD.
The currency market will remain closed on Thursday due to national holiday for Independence Day. Post the RBI measures and FM’s statement, the rupee may gain some momentum on Friday.
Call Rates and G-Secs
The call money rates, rate at which banks borrow from each other for short term funding, ended a tad softer at 10.22 per cent from Tuesday’s close of 10.25 per cent.
The benchmark 7.16 per cent government security, which matures in 2023, ended sharply lower at Rs 91.22 from its previous close of Rs 91.83. Yields hardened to 8.49 per cent from 8.39 per cent.
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