Beginning the second week on a softer note, the rupee ended weaker by 17 paise at 62.33 against the dollar due to a stronger American currency and weaker domestic equity market.

The Indian unit opened also at 62.33 on thin capital inflows with lower domestic and Asian equity market. On Friday, the unit had ended at 62.16 per dollar.

The American currency strengthened against overseas currencies on upbeat outlook by the US central bank. This pulled to the rupee down to 62.46 in the morning session of trading.

Outgoing Federal Reserve Chairman Ben Bernanke has fuelled the expectations of more stimulus reduction highlighting the positive outlook on the US economy.

Further, the BSE-benchmark Sensex was ended down by 64 points (0.31 per cent) at 20,787 points at day’s close.

During the day, the rupee hovered in the range of 62.24-62.46 at the Interbank Foreign Exchange market.

“With improvement in domestic macros and increase in RBI’s foreign exchange reserves (rose $204.09 million to $295.71 billion in the week ending December 27, 2013), the impact of taper on the rupee is likely to be limited,” according to a Yes Bank report.

Call rates and bonds

In the morning trade, the interbank call money rate, the rate at which banks borrow short-term money from each other, ended higher at 8.75 per cent from the previous close of 7.65 per cent on Friday.

Amid less movement during the day, the yield on benchmark government security 8.83 per cent, maturing in 2023, closed softer at 8.78 per cent from Friday’s close of 8.83 per cent. Prices ended higher at Rs 100.29 (from Rs 99.95).

With the extent of liquidity support likely to be lower through open market operations (OMOs), we now expect the 10-year yield to settle around 8.50 per cent by March 2014, the Yes Bank report said.

(This article was published on January 6, 2014)
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