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The rupee ended slightly weaker against the dollar at 58.63 on Tuesday as the state-owned banks bought dollars.
The domestic unit had closed at 58.59 on Monday.
On Tuesday, it opened 6 paise weaker at 58.65 per dollar amid volatile capital flows into the domestic equity market. The BSE-benchmark Sensex ended almost flat at 24,377 points, higher by 14 points (0.06 per cent) over its previous close.
The rupee strengthened to 58.51 against the dollar on mild capital inflows.
According to treasury officials, dollar buying by state-owned banks, most likely on behalf of the RBI, and the absence of big dollar inflows limited a sharp rise in the rupee.
Due to this, the rupee declined to 58.79 per dollar during the day.
The RBI is stacking up dollar reserves in a bid to cap the sharp appreciation of the Indian rupee due to a change at the Central Government. The Narendra Modi-led government is seen to be pro-market which led the rupee to strengthen to an 11-month high since last week.
A sharp appreciation in rupee is likely to hit export competitiveness of the country’s trade.
Call rates, G-Sec yields
The overnight call money rate (the rate at which banks borrow money from each other to overcome short-term liquidity mismatches) closed at 7.50 per cent from the previous close of 7.25 per cent on Monday.
The yield on 10-year benchmark 8.24 per cent bond, maturing in 2027, softened to 9.04 per cent from Monday’s close of 9.07 per cent. Bond prices rose to Rs 93.96 from Rs 93.75. Bond yields and prices move in opposite directions.
Treasury officials said, the yields may touch 10 per cent levels if the government plans to borrow more capital as expected by the market participants.
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