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The rupee’s steady southward journey suggests that the foreign exchange market is not very impressed with the Government’s recent moves to relax foreign investment norms to encourage dollar inflows. On Friday, the rupee ended at an all-time closing low of 61.10 to a dollar.
The domestic unit was weighed down by persistent demand for dollars from banks.
Further, a likely fall in the US unemployment rate triggered anxiety that beginning September, the US Fed may reverse the process that flooded the global market with dollar liquidity. The reversal will depreciate the rupee.
The rupee opened weaker at 60.60 from Thursday’s close of 60.44 a dollar on a wobbly equity market and demand for dollars.
The Government securities market too continued to be bearish. The benchmark 10-year security, which carries a coupon of 7.16 per cent, was sold to market players at a lower price of Rs 93 against the face value of Rs 100. The yield-to-maturity rose to 8.21 per cent against 8.05 per cent at the previous auction.
“There was short covering by a few banks that bought dollars. Also, market players anticipated positive US jobs data. Both reasons weighed on the rupee,” said Mohan Shenoi, President – Group Treasury, Kotak Mahindra Bank.
The Indian currency touched an intra-day low of 61.19 a dollar, near its earlier historic low of 61.21 on July 8. Unchanged interest rates by the central bank, widening current account deficit and poor policy response from the Government were putting pressure on the rupee.
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