Monday, 21 August, 2017

Rupee hits over 2-yr high, foreign lenders sell dollars

Rupee pares early gains, down 4 paise at 64.19 a dollar Rupee Surges To Two-Year High Against US Dollar Today: 5 Things To Know
Juana Turner | 03 August, 2017, 00:59

The Indian rupee spiked up against the USA dollar in afternoon deals on Wednesday, after the Reserve Bank of India slashed key interest rates by 25 basis points, given falling inflation, smooth roll-out of the Goods and Services Tax and a normal monsoon.

Indian rupee surged to a two-year high of 63.73 against the dollar today. The rupee breached the 64 mark and rose by 25 paise to stand at 63.82 against the United States dollar in anticipation of RBI monetary policy. The increased FPI participation has resulted in the rupee gaining by as much as 6 percent since January. "Hence, to protect margins - which are already under pressure due to rising bad loans, higher due diligence - banks likely mulled over higher lending rates or lower deposit rates - they went with the latter", Radhika Rao, an economist at DBS Bank, said in a note on Wednesday. The repo rate, at which RBI lends to banks, is now down to 6 per cent, the lowest in more than six-and-a-half years.

The central bank attributed its prediction on factors such as planned pay hikes for government employees, a recovery in food prices, and the impact on prices from the launch of a national goods and services tax on July 1. So it was not surprise that markets looked underwhelmed after RBI's 25 bps rate cut. Bond yields and prices move in opposite directions.

The 10-year bond yield closed at 6.464%, compared to its previous close of 6.442%.

"If RBI gets confirmation that inflation will remain in the lower territory, there is a possibility of a further rate cut".

Meanwhile, domestic bourses made a stellar rebound after a brief consolidation phase with both the benchmark indices ending at fresh lifetime highs on better-than-expected corporate earnings and RBI rate cut expectations.

The Indian rupee emerged its strongest level since August 2015 on Wednesday.

Mustafa Nadeem, CEO, Epic Research: "We have seen positive built up in interest rate sensitive sectors like automobile, banking, reality and non-banking financial companies (NBFC)".

Recommended

Qatar Airways ditches plan to buy American Airlines stake Qatar Airways ditches plan to buy American Airlines stake Akbar Al Baker , said, "We have witnessed significant growing demand between South America to Qatar and beyond". Qatar Airways has scrapped its plans to buy an equity stake in American Airlines.

Austin Jackson makes 'the catch of the year' Austin Jackson makes 'the catch of the year' The Boston Red Sox have historically been a collection of sluggers with one ace and a "pray for rain" type of rotation after that. That's when Cleveland got to Sale again - as Edwin Encarnacion took advantage of Fenway's short porch for a two-run homer.

Pres. Trump Signs New Russia Sanctions Pres. Trump Signs New Russia Sanctions Warner told CNN . "The response came from Donald Trump Jr. and - I'm sure - in consultation with his lawyer". Sekulow didn't immediately respond to a request for comment made through his spokesman, Gene Kapp.