The rupee ended higher for the second straight session on Wednesday after trading in a narrow range, on dollar sales by some foreign banks, although a retreat in the euro and a fall in domestic equities capped gains.
Dollar demand from oil importers, the biggest buyers of the greenback in the domestic foreign exchange market, also tempered the rupee?s rise, traders said.
The rupee ended at 52.95/96 to the dollar, 0.5% stronger than its previous close of 53.21/22 after moving in a band of 52.91 to 53.20 in the session.
?2012 has just started and trading has not gathered full momentum in global markets. Also, there is still no clarity on economic outlook of the euro zone, so rupee is likely to stay in a narrow band,? said Naveen Raghuvanshi, associate vice president of foreign exchange trading at the Development Credit Bank.
10-year bond yields were near the lowest level in more than a week on optimism a central bank plan to buy government debt will boost demand.
The Reserve Bank of India said on Tuesday that it will purchase R12,000 crore of notes due in 2017, 2021, 2022 and 2027 in an open-market auction on January 6. It bought R41,200 crore of securities since November 24, official data show, to ease a cash crunch at banks and help a record sovereign borrowing programme succeed. India boosted its annual debt-sales target by 8.5% last week to R5.1 lakh crore.
?The RBI?s open-market purchases are keeping yields down this week,? said Debendra Kumar Dash, a fixed-income trader at Development Credit Bank in Mumbai. ?This is helping ease the negative sentiment among investors due to the huge government borrowing programme.?
The yield on the 8.79% notes due November 2021 was 8.37% in Mumbai, according to the central bank?s trading system. It fell to 8.36% on Tuesday, the lowest level since December 22.
