The Indian rupee hit record highs thanks to the intervention of the RBI; bond yields rise | The mighty 790 KFGO


By Swati Bhat

MUMBAI (Reuters) – The Indian rupee has gradually recovered from hitting a record low on Tuesday, following central bank intervention as bond yields edged higher on higher global crude oil prices.

The partially convertible rupee was trading at 77.63/64 to the dollar at 08:05 GMT from its close of 77.45 on Friday. The rupiah touched a record low of 77.7975 during the session.

Traders said the central bank had started selling dollars through state-owned banks at around 77.75 rupees, helping the currency regain ground.

“Given that the RBI has large foreign exchange reserves, we expect the rupee to remain more stable and weaken less than most other emerging market currencies against the greenback over the next couple of years. “said Adam Hoyes, deputy economist at Capital Economics, in a note. .

Traders said the RBI had been active in the spot and futures markets in recent weeks to help limit the rupiah’s high volatility.

“The rupiah fell to a new all-time low as dollar strength continued and global crude oil prices continued to trade higher,” said Gaurang Somaiya, forex analyst at Motital Oswal Financial Services.

“We expect USDINR momentum to remain positive and range between 77.40 and 78.20.”

Analysts said the recent rise in global and domestic inflation added to the currency’s decline while pushing bond yields higher.

Annual wholesale price inflation in India accelerated to 15.08% in April from 14.55% the previous month, remaining in double digits for the 13th consecutive month, government data showed on Tuesday.

Inflation based on the consumer price index in April rose more than expected to 7.79% from a year earlier, remaining above the central bank’s tolerance band of 6% for a fourth straight month, according to last week’s data.

Economists believe the high inflation rate could force the RBI to hike rates again in its June policy review after unexpectedly raising it by 40 basis points at an out-of-round meeting earlier this month.

India’s benchmark 10-year bond yield was trading at 7.36%, up 4 basis points on the day.

Brent crude futures fell 18 cents, or 0.16%, to $114.06 a barrel at 0726 GMT.

The rally in Indian stocks after the losses of the last few sessions helped prevent a further decline in the rupiah. BSE’s equity benchmark and broader ESN index both rose more than 2% each.

Foreign funds, however, sold off India’s stocks and debt. They are net sellers of more than $20 billion in stocks and about $2 billion in debt so far in 2022.

(Editing by Jacqueline Wong)

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