Rupee jumps to 59.59 per dollar on hopes of clear majority NDA
Mumbai: The Indian rupee on Tuesday opened higher
against the dollar on increased optimism that India will have a stable
government after the election results due on Friday.
At 9.08am, the rupee strengthened 0.76% to 59.59 per dollar compared
with its previous close of 60.05, its strongest rise since 25 April.
Some of the exit poll surveys released on Monday after
the last phase of polling gave the Bharatiya Janata Party (BJP)-led
National Democratic Alliance (NDA) a simple majority in the Lok Sabha.
“The market is now more confident about a stable
government. We have seen a lot of inflows from foreign funds and
exporters in the last two days. How high rupee will go will depend on
when the Reserve Bank of India (RBI) stepped in to buy dollars” said a
dealer with a French Bank.
He added that he expects the rupee to move in the of range 59.40 to 60 per dollar.
RBI has been actively mopping up dollars from the markets
to avoid a sharp appreciation in the rupee, said dealers. Data released
on Monday showed that RBI bought dollars worth $7.78 billion in March.
The data which comes with a lag of two months,
showed that RBI purchased
a total of $8.75 billion in the spot market in March and sold $970
million which meant that the central bank pulled out a net $7.78 billion
from the local foreign exchange market.
The dollar buying by the central bank was the highest in
three months and the first time since December when the RBI had bought a
net $3.48 billion from the forex market.
So far this year, the rupee has gained 3.44% against the
dollar, while foreign institutional investors have pumped in $5.7
billion in the local equity markets.
Meanwhile, RBI’s dollar purchases has meant relatively
comfortable liquidity conditions, as purchase of dollars infuses rupee
into the market. As a result, demand for government bonds has remained
strong, pushing yields lower, say traders.
At 9.15am, the yield on India’s 10-year benchmark bond
was trading at 8.72%, flat compared with its previous close. Yields
continue to hover near two-month lows.
Bond yields and prices move in opposite directions.
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