 "Rupee dollar")
The rupee hit a new intraday low of 83.57 against the US dollar on Friday as geopolitical tensions escalated in West Asia but pared losses after Iran downplayed the impact of an Israeli missile attack.
The Indian unit closed the day at 83.47 a dollar, compared to 83.54 on Thursday.
The yield on the benchmark 10-year-government bond rose by 4 basis points (bps) to settle at 7.23, compared to 7.19 per cent on Thursday.
“Global leaders' calls for restraint eased market fears, leading to a recovery in the rupee after an initially weak opening. With the Indian elections underway, rupee volatility within the range is expected to persist. The rupee's range is anticipated to be between 83.20-83.70," said Jateen Trivedi, VP research analyst - commodity and currency, LKP Securities.
The unit fell to a fresh low of Rs 83.70 against the US dollar in the non-deliverable forwards (NDF) market. Market participants said intervention by the Reserve Bank of India (RBI) prompted the rupee to open at 83.56 against the dollar in the over-the-counter (OTC) market.
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“The Indian rupee fell to a new low in the NDF but the RBI ensured it remained near Rs 83.50 a dollar by intervention in NDF as well as local OTC markets. On Thursday, RBI sold almost $2 billion and ensured that whatever dollars it bought are used during the rainy times,” said Anil Kumar Bhansali, head of treasury and executive director at Finrex Treasury Advisors LLP.
Traders in the government bond market wound up their positions ahead of the weekend to mitigate risk, contributing to an uptick in yields. Trading in the soon-to-be benchmark 10-year bond declined significantly. The bond was the second most traded until Thursday, but dropped to the fifth spot on Friday.
“There is no specific reason and only that the sentiments have soured after the US yields have gone up. As the yields went up, FPIs (foreign portfolio investors) have started selling a bit. The fact that it is a weekend, the traders will not want to take the risk of two days (due to)…the geopolitical risk that is going around in the world right now,” said Vijay Sharma, senior executive vice-president at PNB Gilts.
“The trade volume of the new 10-year bond fell because when there are not too many outstanding issues, most of it would have already gone into the hands of the investors. And investors have a tendency not to sell when in loss,” he said.
The yield on the new 10-year bond has risen by 6 bps since its issuance.
The bond market had robust FPI inflows for a year, before a reversal in April. Market participants anticipate that the selling pressure will persist, with the expectation that the bond market will regain its stability following the JP Morgan bond index inclusion in June. In April, foreign investors pulled out a net Rs 6,174 crore from the debt market.
The yield on the benchmark bond has surged by 17 bps in April. “There is a lot of uncertainty around the war. If the geopolitical risk is not increasing further, then I think we are near the top of the range,” said Sharma.
