NEW DELHI: After opening on a weak note versus the US dollar, the rupee settled on a strong footing on Wednesday as some foreign and private banks were said to have sold the greenback for overseas companies’ investment in Indian firms, dealers said.

Dollar sales by exporters noting higher dollar/rupee levels also aided the partially convertible domestic currency, currency dealers added.

The local unit settled at 74.27 per US dollar as against 74.3725 per dollar at close on Tuesday. In the course of the day’s trade, the Indian currency moved in a band of 74.2425-74.50 per dollar. It had opened at 74.50 versus the greenback.

The weakness in the early part of the day’s trade was owing to the strengthening of the US dollar after a surge in US inflation in October fuelled speculation of the Federal Reserve starting to raise interest rates sooner than later.

The anticipation of higher interest rates in the world’s largest economy also led to a hardening of US yields, further weighing on appetite for emerging market currencies such as the rupee.

However, as the day progressed, the dollar lost some ground globally, with the dollar index (which measures the greenback against a basket of six major rival currencies) last at 95.93, lower than 96.05 in early trade. At the end of the previous week, the index was at 95.12.

“Over the last couple of days, the rupee has been constantly aided by overseas flows. There was Microtech yesterday (Tuesday) and now today there were even more dollar sales because there are more fund-raising plans by Indian companies amid a stellar showing in stock markets,” a dealer with a large private bank said on condition of anonymity.

Government bonds, meanwhile, were steady, with the yield on the 10-year benchmark 6.10 per cent 2031 paper settling at 6.36 per cent, unchanged from the previous close. Bond prices and yields move inversely.

Bond traders kept off large bets in a truncated week, with the sovereign debt and currency markets closed on Friday for Guru Nanak Jayanti.

Dealers hope for the Reserve Bank of India to step into the market and prevent yield on the 10-year benchmark bond yield from rising beyond the crucial 6.40 per cent mark.

By admin

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