Rupee falls on no easing cues from Fed

The rupee weakened, snapping a two-day gain, after the Federal Reserve refrained from signalling more monetary easing.

Funds pumped into the US economy have filtered through to Asia where interest rates are higher, with Fed chairman Ben S Bernanke saying borrowing costs would probably remain low through late 2014. Foreign investors added $5 billion to holdings of Indian stocks last month through February 28, the most since October 2010.

The rupee declined 0.4 per cent to 49.22 per dollar in Mumbai, according to data compiled by Bloomberg. The currency strengthened 0.9 per cent last month, extending January’s record 7.3 per cent advance.

Bond yields rise
India’s benchmark bonds fell, pushing yields to a three-week high, on speculation that investors would sell fixed-income notes to tide over a cash squeeze in the banking system.

The yield on the 8.79 per cent notes due November 2021 rose four basis points to 8.24 per cent in Mumbai, the highest since February 9. The cost of one-year interest-rate swaps rose three basis points to 8.17 per cent, according to data compiled by Bloomberg.

Call rate eases
The call rate at the overnight money market on Thursday closed lower at nine per cent, compared with yesterday’s close of 9.05 per cent.