Stable exchange rate is important to attract investments: Subbarao
The rupee was trading weak by 46 paise at 60.90 against the dollar at 4.30 p.m. local time on increased demand for dollar from importers.
The rupee opened weak at 60.60 per dollar against the previous close of 60.44 as the central bank has maintained status quo on interest rates and due to lack of clarity on when the liquidity tightening measures would end.
On Thursday, the rupee recovered from a low of 60.89 on the bank of announcement by the central bank to prop up the domestic unit.
RBI has said that foreign institutional investors would require a mandate from participatory note (P-Note) holders to hedge on their behalf. This move, traders say, will help in reducing volatility in the spot currency as well as the futures markets.
“The new announcement helped the rupee to gain in the last session of the day’s trade as foreign banks sold dollars after the RBI announcement,” said a senior treasury official of a public sector bank.
RBI is trying to contain the volatility and the extent of its success will be known in a month or so, the official said.
Intraday, the rupee moved between a high of 60.26 and a low of 60.89, respectively.
Earlier, Finance Minister P. Chidambaram promised more measures to prop up the currency, such as reducing the amount of non-essential imports and issue of quasi-sovereign bonds.
Call rates, G-Secs
The inter-bank call money rates, the rates at which banks borrow short-term funds from each other, opened sharply higher at 10 per cent from the previous close of 7.5 per cent.
The benchmark 7.16 per cent government security, which matures in 2023, opened higher at Rs 93.5 from the previous close of Rs 93.93. Yields on the benchmark G-Sec hardened to 8.13 per cent from the previous close of 8.06 per cent.
Once RBI withdraws the liquidity tightening measures, the yields will soften further, according to a bond market dealer.
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