Rupee falls on RBI's tough policy easing stance

The currency declines 0.5% to 54.19 a dollar, the biggest drop since April 4

The rupee fell the most in more than a month as the Reserve Bank of India (RBI) Governor Duvvuri Subbarao said there was very little chance monetary policy would be eased further.

Government bonds declined. The rupee declined 0.5 per cent to 54.19 a dollar in Mumbai, the biggest drop since April 4, according to data compiled by Bloomberg. The currency earlier gained as much as 0.3 per cent. One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, rose 16 basis points, or 0.16 percentage point, to 8.58 per cent.

Bonds trade bearish

Government bonds traded bearish on selling pressure from banks and companies.

The 8.33 per cent government security maturing in 2026 dipped to Rs 104.27 from Rs 104.38 last Friday, while its yield inched up to 7.80 per cent from 7.79 per cent.

The 8.15 per cent government security maturing in 2022 dropped to Rs 102.57 from Rs 102.66, while its yield edged up to 7.75 per cent from 7.74 per cent.

Call rates end lower
The overnight money rates ended lower due to lack of demand from borrowing banks amidst ample liquidity in the banking system. The rate finished lower at 7.40 per cent from 7.55 per cent previously.