The rupee recovered from its day’s lows to close stronger at 67.10 against the dollar on the back of a bounce-back after a sharp fall in the domestic equity market and intervention by the Reserve Bank of India.

In intra-day trade, the domestic unit hit a low of 68.61 due to continued concerns over growth, downgrade fears and a possible US war on Syria fuelling concerns over the oil import bill. However, the RBI intervened by asking public sector banks to sell dollars. In addition, appointment of the new RBI Governor Raghuram Rajan improved sentiments in the forex market.

The RBI on Wednesday partially rolled back some of the curbs imposed in August. Relaxing the curbs on outward investments, the apex bank said a company will be allowed to invest up to 400 per cent of its net worth provided it has raised the funds through external commercial borrowings (ECBs).

The RBI also opened a special concessional window for swapping foreign currency non-resident banks (FCNR (B)) deposits at a fixed rate of 3.5 per cent per annum.

“The reversal of capital-control measures by the central bank along with the positive sentiment on the measures by the new RBI Governor contributed to the rupee’s recovery,” said S. Srinivasaraghavan, head of treasury at Dhanlaxmi Bank.

However, according to economists, the surge in crude and gold prices, which constitute India’s biggest imports are a matter of worry for the Indian economy. In recent weeks, many rating agencies have aired their concerns that the slowdown in domestic growth threatens to derail the fiscal austerity plans.

Call rate up, bond yields down

The inter-bank call money rate, the rate at which banks borrow money from each other to meet their short-term fund requirements, ended higher at 10.25 per cent from its previous close of 10.10 per cent.

The 7.16 per cent government bond, which matures in 2023, ended higher at Rs 91.95 from the previous close of Rs 90.75. Yields ended lower at 8.38per cent from 8.58 per cent.

Beena.parmar@thehindu.co.in

(This article was published on September 4, 2013)
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