Rupee leads Asian currencies; bond yields ease as crude slips below $90

The rupee settled 0.35 per cent higher at 95.41 per dollar as central bank intervention and falling crude prices lent support; benchmark bond yields also eased

The rupee strengthened on Tuesday, emerging as the best-performing currency in Asia, on the back of aggressive central bank intervention through dollar sales combined with a sharp fall in crude oil prices. 

The local currency settled at 95.41 per dollar, up 0.35 per cent, against the previous close of 95.74 per dollar. Domestic government bond yields also eased, with the yield on the benchmark 10-year government bond slipping 2 basis points to 6.85 per cent and the yield on the five-year government bond down 4 basis points to 6.46 per cent. 

“The rupee led Asian currency gains as the combination of heavy RBI intervention and tumbling crude oil prices breathed fresh life into the domestic unit,” said Dilip Parmar, senior research analyst at HDFC Securities. “A sharp retreat in global oil prices 

successfully revived broader market risk appetite, leaving the greenback struggling to sustain its early momentum as the Dollar Index slipped beneath the 99 mark, he added. 

Bond market participants said bond yields reversed losses during the latter half of the day, tracking a fall in crude oil prices. Brent crude fell below $89.64 per barrel amid signs of progress in US-Iran peace talks, with Pakistan indicating that a deal was close.

“The rally at the end of the market hour was because of the fall in crude,” said a dealer. “The trajectory of US yields and crude are the major cues for the market right now,” the person added. 

Meanwhile, the yield on 10-year government bond fell by 19 basis points in the current financial year, while it has hardened by 26 bps in the current calendar year so far.

 

The rupee has depreciated by 5.80 per cent in the current calendar year so far, whereas it has weakened by 0.63 per cent in the current financial year.