The rupee hit a four-month high to close 27 paise stronger at 61.14 a dollar on Monday due to heavy capital inflows, following bullish prospects of the BJP coming to power at the Centre, and dollar selling by exporters.

On Friday, the rupee had gained 34 paise to close at over a month-high of 61.41 to the dollar. Extending its rising streak for the fourth straight day on Monday, the currency unit appreciated by 51 paise to nearly four-month high of 60.90 against the dollar in opening trades.

"The rupee surged primarily on foreign investors’ bullish prospects of growth story with expectations of certainty on policies in the upcoming elections. FIIs are continuously buying in the market,” said N.S. Venkatesh, Head of Treasury, IDBI Bank.

Also, exporters sold dollars citing further appreciation in the rupee, he said. Amid some profit booking, the unit declined to 61.20 in the afternoon trades.

However, robust capital inflows in the domestic equity market supported the rupee as the Sensex soared to an all-time high of 21,483.74 points after the BJP’s victory in state Assembly elections.

Call rates, G-Sec weaken

The inter-bank call money rate, the rate at which banks borrow from each other to meet their short-term requirements, ended a tad weaker at 7.75 per cent from Friday’s close of 7.80 per cent.

The 10-year benchmark 7.16 per cent government security, which matures in 2023, ended weaker at Rs 87.14 from the previous close of Rs 87.50. Yield on the security hardened to 9.22 per cent from 9.16 per cent.

The widely traded 8.83 per cent government security (also maturing in 2023) hit its lowest level since being issued on 22 November. The yield ended 5 basis points higher at 8.90 per cent from 8.85 per cent on Friday.

The yields are likely to stay at elevated levels for sometime now as the government is buying back short-term securities and issuing long-term ones, Shenoi said. High bond yields impact negatively on banks’ G-sec portfolio.

(This article was published on December 9, 2013)
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