The currency closes at 63.13 per dollar against its previous close of 61.71; Yield on 10-year benchmark bond rises to 9.24%
Mumbai: The rupee closed at a record low on Monday, while bond yields rose to a five year-high on continuing pessimism in the financial markets about a recovery in Asia’s third largest economy and the ability of the United Progressive Alliance government (UPA) to revive growth.
The Indian currency ended trading at 63.13 per dollar, down 2.31% from its previous close of 61.71 per dollar, while the yield on India’s 10-year benchmark bond rose to 9.24%—a level last seen in August 2008.
“There are fears about more steps from the Reserve Bank of India (RBI) to shore up rupee, which is weighing on yields,” said N.S. Venkatesh, treasurer at IDBI Bank Ltd.
RBI has taken a host of measures in the recent weeks to drain excess liquidity in the banking system and curb forex outflows, in a bid to support the rupee. RBI first capped the amount banks can borrow from the apex bank’s liquidity window and hiked the daily balance requirement for banks on maintaining the cash reserve ratio (CRR), or portion of deposits banks need to park with RBI.
When those measures didn’t show the desired results, RBI partially rolled back the currency’s convertibility and imposed capital controls on resident Indians. The objective was to stem dollar outflow from the country at a time when the greenback is in short supply, but the decision effectively undoes key reforms of the past two decades that removed capital controls.(livemint.com)