Market participants said that the weakness in the rupee can be attributed to profit booking by investors ahead of the first round of the presidential election in France.
The rupee fell by 5 paise on Friday to end at 64.61 to the dollar, after having declined to an intraday low of 64.67 during the session.
Market participants said that the weakness in the rupee can be attributed to profit booking by investors ahead of the first round of the presidential election in France. They added that the hawkish nature of the monetary policy meeting’s minutes, which were released on Thursday, also weighed on sentiment.
The rupee had ended the previous session at 64.56 but weakened overnight to open at 64.64 on Friday as investors were expecting the dollar index to gain. The dollar index, which measures the greenback against a basket of six currencies, was just over 99.91, around 14 basis points higher than the previous close.
State-owned banks were the largest buyers of the greenback on Friday, having bought dollars whenever the USD-INR pair hit 64.57-67.58 levels, thereby causing some weakness in the rupee. However, this weakness was partly stemmed by some custodian banks, who sold dollars at 64.63-64.64 levels in order to buy Indian bonds, dealers said.
“The market will be watching the French election very closely,” said a currency dealer with a foreign bank. “Right now, there is no saying with certainty what the outcome would be. And the outcome could very well dictate the direction the rupee will take.”
Meanwhile, the 10-year benchmark bond yield ended 5 basis points higher from the previous close at 6.92 percent. A similar movement was seen across gilts of various tenures.The 3-year government bond yield and the 5-year government bond yield both ended 6 basis points and 3 basis points respectively. “We saw some selling across all tenures today and it would be safe to say that it was largely a reaction to the hawkish commentary by the monetary policy committee in its minutes,” said R Sivakumar, Head – Fixed Income, Axis Mutual Fund.