The rupee fell for the third day in a row to close at fresh 2-1/2-month low of 55.21 against the dollar on Thursday, down by 9 paise following sustained dollar demand from importers. However, firm stock markets and slightly weak dollar overseas amid continued foreign fund inflows capped the fall, a forex dealer said.
At the Interbank Foreign Exchange (Forex) market, the domestic currency commenced higher at 55.08 a dollar against previous close of 55.12 and immediately touched a high of 55.01 on strong local stocks and weak dollar overseas.
Emergence of dollar demand from importers, mainly oil refiners, to meet their month-end requirements weighed on the rupee and it fell back to a low of 55.27 before concluding at 55.21, a fall of nine paise or 0.16%.
“The rupee reversed initial gains even after rising risk appetite in stock markets. The oil importers demand also checked the gains in the rupee,” Pramit Brahmbhatt, CEO, Alpari Financial Services (India) said.
“The euro was trading slightly lower after the German and euro zone PMI figures continued to remain in contraction territory. The uncertainty prevailing in the euro zone puts pressure on the euro and subsequently on the rupee,” India Forex Advisors Abhishek Goenka CEO said.
Yields rise on more govt borrowing fear
Bond yields rose on Thursday after a government source said extra borrowing may be needed to plug a fiscal gap which could be wider than expected.
The fear of more market borrowing wiped out earlier gains in bond prices after banks’ borrowing from the central bank rose to an over five-month high, raising hopes that the Reserve Bank of India will announce a debt buy to cap the cash deficit.
The benchmark 10-year bond yield ended 2 basis point higher at 8.23%. It traded in a 8.20-8.23% band during the session.