Rupee gains for 5th straight day, ends at 85.14 against US dollar

The dollar index falls 1.13% to 98.10, the lowest since April 2022; bond yields slump to multiyear low

The rupee strengthened for the fifth day running on Monday, opening 27 paise stronger at 85.04 against the US dollar before losing some steam by the end of the trade as the Reserve Bank of India(RBI) intervened in the foreign exchange market via dollar purchases to shore up its reserves, said dealers.

 

The domestic currency finally settled at 85.14 per dollar, against the previous close of 85.38.

 

On the other hand, government bond yields slumped as traders continue to stock up on gilts at lucrative levels. The benchmark 10-year government bond yield fell by 5 basis points to settle at 6.32 per cent, lowest since November 9, 2021.

 

“Everyone who can invest in G-sec is doing that because of expectation of further fall in yields,” said a dealer at a primary dealership.

 

“We might retrace a little from 6.30 per cent (yield on benchmark bond), a little slow fall will happen below 6.30 per cent,” he added.

 

The local currency appreciated up to 85.04 per dollar during the day on the back of a fall in dollar index and foreign inflows. However, state-owned banks bought dollars likely on behalf of the RBI causing the rupee to settle at 85.14 per dollar, against the previous close of 85.38 per dollar. 

 

The dollar index was down 1.13 per cent to 98.10, the lowest since April 2022. It measures the strength of the greenback against a basket of six major currencies.

 

“We are seeing inflows, and the dollar is weak which is positive for the rupee,” said a dealer at a state-owned bank. “As we had expected the RBI is intervening at these levels,” he added.

 

India’s foreign exchange reserves have increased by $37 billion in the current calendar year so far on the back of increase in foreign currency assets, data by RBI showed.

 

Foreign currency assets increased on the back of inflows and revaluation as the dollar weakened over the year.

 

“There is the revaluation factor, and the RBI is also buying dollars when the rupee moves toward below 85 level. The levels 85 per dollar and 85.50 per dollar are good levels for buying,” said the treasury head at a private bank.

 

Meanwhile, bond dealers said that despite the global scenario, where the US Treasury yields are volatile, the domestic debt market is seen tracking the domestic cues.

 

“The data is good and rate trajectory is favourable, the global scenario is a bit volatile, but nobody is looking at that,” said a dealer at a state-owned bank.