Rupee surges 75p, bonds prices up

The rupee on Tuesday posted its biggest single intraday gain in nearly two years, appreciating by 75 paise, or 1.02 per cent, against the US dollar while bond yields fell to their lowest level in over two weeks following the Reserve Bank of India’s measures to maintain financial system stability and encouraging manufacturing PMI data.

Global dollar weakness and sustained foreign fund inflows too supported the rupee. Traders said that they expect the RBI to now allow the rupee to appreciate as it could help in combating inflation.

At the interbank forex market, the rupee finished at 72.87, up 75 paise from its previous close of 73.62. The dollar index, which gauges the greenback’s strength against a basket of six currencies extended its flight below the 92 levels.

Encouraging macro data uplifted the domestic risk sentiment. The benchmark 10- year bond yield closed 18 basis points lower at 5.94 per cent as the RBI introduced several measures to soothe sentiment in the bond market.

Darshit Purohit at IFA Global said, “The central bank has stepped off the gas in accumulating the foreign exchange reserves and might intervene only to curb sharp volatility. Rupee is now down by only 2 per cent for the calendar year 2020. It marked an all- time low on April 22, 2020 at 76.91 ( losing 7.73 per cent). Global dollar weakness, sustained FII inflows ($ 6.82 billion in August), strengthening Asian currencies and RBI stepping aside from dollar buying intervention are the key factors behind the recent recovery in the Rupee.”

“The immediate support is 72.40 to 72.50 levels,” added Purohit.

The Reserve Bank on Monday announced a host of steps, including term repo operations totalling Rs 1 lakh crore in midSeptember to ease pressure on liquidity.