The Reserve Bank of India likely intervened before the local spot market opened on Monday and intermittently afterwards, keeping the currency above all-time lows, traders said.
This helped the rupee end higher at 89.23 after hitting a new record low of 89.49 on Friday.
A sharp fall in the rupee could impact inflation and deter foreign investors from investing in Indian bonds. Meanwhile, RBI Governor Sanjay Malhotra said in an interview with Zee Business television channel on Monday that there is scope to further cut the policy rate.
Besides, the market is also focused on the RBI’s next steps to manage both liquidity and bond yields. “Onshore bonds are treading water, waiting for signals on central bank policy direction, debt market support measures and overall liquidity policies,” said Radhika Rao, executive director and senior economist at DBS Bank. The RBI bought bonds worth 148.10 billion rupees ($1.66 billion) in the week ended November 14. bought 124.70 billion rupees the week before. The purchases have had little effect on the market as traders are confident they were intended to replace maturing investments and were rather a signal of lower interest rates.Meanwhile, the Indian economy was likely to grow 7.2% in the July-September quarter, after growing 7.8% in April-June, according to a Reuters poll. The official figures will be announced on Friday.
PRICES
India’s overnight index swap (OIS) ended lower, tracking government bond yields and also benefiting from Malhotra’s comments.
The one-year OIS rate ended at 5.44%, while the two-year rate closed at 5.4350%. The five-year interest rate fell by 6 basis points to 5.7125%
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