Money markets: Rupee, bonds firm even after Viral Acharya’s exit

Mumbai | Published: June 25, 2019 2:10:10 AM

Rupee stable, puts on value against the dollar, benchmark yield stays flat.

rbi, reserve bank of india, stock markets, stocks, rupee, bondsTreasurers believe the rupee is trading at comfortable levels and there might be lesser volatility going forward.

By Shashank Nayar

The money markets on Monday remained unruffled by the early departure of Viral Acharya, deputy governor of the Reserve Bank of India (RBI), who will relinquish his position six months ahead of the stipulated term. The rupee was stable, putting on value against the dollar while the benchmark yield staying flat.

The rupee on Monday appreciated by 22 paisa against the greenback to close at Rs 69.35—a near two-week high. Foreign portfolio investors (FPIs) have invested nearly $1.2 billion in the debt markets in June on the back of an outflow of $537 million in May. They have pulled out $161 million from the equity markets so far in June.

The yield on the most traded bond—7.26% yielding notes maturing in 2029—were flat at 6.85%, levels similar to those on Friday. Last Thursday, June 20, the benchmark yield had closed at 6.79%, which was the lowest in the 20 months till the day.

Currency dealers believe the rupee along with emerging market currencies and the euro have appreciated given the weaker dollar amid expectations of the Federal Reserve cutting rates next month. “We expected the rupee to depreciate following the deputy governor’s exit, but global sentiments such as a falling dollar index and a dovish Fed has led to the rupee to appreciate,” Sajal Gupta, associate director, Edelweiss, said. The dollar index– which pegs the dollar against a basket of six currencies — fell by 0.23% on Monday and was trading at levels of 95.99. The dollex has fallen by 1.68% in the past four trading sessions.

Treasurers believe the rupee is trading at comfortable levels and there might be lesser volatility going forward. “There is no turbulence right now in the market and the Indian currency is trading at comfortable levels,” said Ashutosh Khajuria, VP-treasury, Federal Bank.

Dealers also believe strong FPI in the Indian debt markets has kept the yields on the benchmark bond at lowest levels since the past 20 months. “With central banks globally turning dovish and cutting rates, a decent amount foreign money has entered Indian debt markets in June which should keep yields at current levels,” said Mahendra Jajoo, head-fixed income, Mirae Asset Global. The RBI on June 6 cut the key repo rate by 25 basis points to 5.7%, the third consecutive cut since February.

Among major Asian currencies, the South Korean Won on Monday appreciated the most at 0.64% from its previous close followed by the Indonesian rupiah, which appreciated by 0.20%.

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