Wednesday, 4 March 2015 00:00
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Reuters: The rupee ended steady on Tuesday in dull trade, while the Central Bank raised yields on short-term Government securities, raising expectation the downward pressure on the local currency will ease.
Yields on Treasury bills jumped between 86 basis points and 91 basis points at a weekly auction a day after the central bank scrapped a lower repo penalty rate of 5%.
Actively-traded one-week forwards ended steady at 133.60/75 per dollar.
“Since the rates have gone up, forward premiums will also go up, but the pressure on the rupee will ease,” said a currency dealer on condition of anonymity.
Central Bank Governor Arjuna Mahendran told Reuters in an interview that the lower penalty repo rate had resulted in volatility in interest rates and he was not expecting the rupee to be under pressure as foreign currency reserves are on the rise, recovering from a sharp fall in January.
Mahendran said the Central Bank intervention is necessary to maintain stability in the rupee.
Whenever there is a big import bill, the Central Bank tries and see that it doesn’t drag the rupee down substantially, Mahendran said.
“It is not a liquid market. Our job is to see that the currency floats, but floats in a steady manner without any big jerks in either direction.”
The spot currency ended steady at 132.90/133.20 per dollar for a seventh straight session, keeping to the limits set by the Central Bank.
