Rupee regains its ground against dollar snapping three day losing streak

The rupee recovered 34 paise against the dollar as RBI stepped in via state-run banks while bond yields eased after strong OMO auction demand calmed sentiment

The rupee regained its ground against the United States (US) dollar on Friday, snapping its three-day consecutive losing streak. The rupee settled 34 paise stronger at 85.38 per dollar, against the previous close of 85.72 per dollar, on the back of dollar sales by the central bank.

 

The local currency fell up to 85.87 per dollar against the greenback in the early trade, which it recovered later, likely due to the dollar sales by state-owned banks on behalf of the Reserve Bank of India, dealers said.

 

“The RBI was there at around 85.85 per dollar after weakening in the morning. The sharp fall was based on news reports of war,” said a dealer at a state-owned bank. “We might open stronger next week, if nothing major happens during the weekend”.

 

 

The domestic currency had witnessed its steepest single-day decline in more than two years on Thursday to erase all its gains for both the current calendar year and the financial year. However, it bounced back on Friday to trade 0.27 per cent stronger against the greenback.

 

The report of escalation of tensions between India and Pakistan weighed on the market sentiment in the early trade. While there were serious cross-border attacks and counterattacks between Pakistan and India, they did not match the scale or intensity portrayed in the media coverage, said dealers. 

 

On the back of caution, the underwriting commission cut-off rates for primary dealers (PD) were set at a multi-year high of ₹14 for the 15-year bond and ₹30 for the 40-year bond.

 

However, the sentiment was uplifted in the bond market later with the open market operations auction (OMO) conducted by the RBI, where the central bank received bids worth ₹76,845 crore against the notified amount of ₹25,000 crore.

 

The benchmark 10-year government bond yield settled at 6.38 per cent, against the previous close of 6.40 per cent.

 

“We saw that the PD fee was so high for the auction today because of the news, later we found out it wasn’t the case. Also, the OMO auctions are positive for the bond market,” said a dealer at another state-owned bank. “The demand is there in the market, and the bond yields are expected to soften given we don’t see anything happening on the border,” he added.