Indian rupee and bond prices gained on Wednesday after continued fall in crude oil prices eased fears of higher inflation and fiscal slippage. Bond prices gains because of Reserve Bank of India announced buyback of government securities through open market operations.
Rupee, bond gain on crude fall, RBI OMO buy
Rupee strengthened to seven week high while 10 year bond prices surged to 15 week high.
At 9.15am, the home currency was trading at 72.08 a dollar, up 0.81% from its Tuesday’s close of 72.67. The currency opened at 72.16 a dollar and touched a high of 72.07 — a level last seen on 21 September.
The 10-year government bond yield stood at 7.708% — a level last seen on 1 August, from its previous close of 7.804%. Bond yields and prices move in opposite directions.
On Tuesday, RBI announced that it will buy Rs 12000 crore of bonds via open market operations on 15 November.
On Monday, government announced Retail inflation which unexpectedly eased in October to 3.31% from 3.7% a month ago on the back of lower prices of pulses, vegetables and sugar.
“With benign food prices and recent decline in international oil prices, CPI inflation is likely to remain below 4% in H2FY19. Hence, RBI is also likely to remain on hold”, said Sameer Narang, Chief Economist, Bank of Baroda
Benchmark Sensex rose 0.53% or 184.68 points to 35,329.17 points. Year to date, it has rose 4.5%.
So far this year, the rupee has declined 11.5%, while foreign investors have sold $5.72 billion and $7.87 billion in the equity and debt markets, respectively.
Asian currencies were trading higher. Indonesian rupiah was up 0.29%, Thai Baht 0.26%, South Korean won 0.11%, Philippines peso 0.11%, China renminbi 0.1%. However, Japanese yen was down 0.1%.
The dollar index, which measures the US currency’s strength against major currencies, was trading at 97.072, down 0.24% from its previous close of 97.303.