The Indian rupee on Tuesday strengthened against the US dollar after the Reserve Bank of India (RBI) kept its policy rates unchanged and said more foreign investors will be allowed in the Indian debt market.

The rupee closed at 63.75 against the US dollar, up 0.46% from its previous close, after touching a high of 63.74—a level last seen on 23 July.

The Reserve Bank of India (RBI) left interest rates unchanged at its monetary policy review on Tuesday, even as the central bank said that the policy stance remained accommodative.

RBI governor Raghuram Rajan said at a post policy conference with the media that the central bank will allow conversion of foreign investors’ debt limit to be denominated in rupee, instead of dollars. This will effectively free up more space for foreigners to invest more in Indian debt papers. However, it will likely take some time, and may happen only after September, the RBI governor said.

The RBI’s benchmark repo rate stands at 7.25%. Rates have been reduced by 75 basis points since the start of 2015. One basis point is one-hundredth of a percentage point. The cash reserve ratio (CRR) was left unchanged at 4% and the statutory liquidity ratio (SLR) was also maintained at 21.5%.

The benchmark equity index Sensex erased most of its losses after the policy, and closed down 0.41%, or 115.13 points, at 28,071.93. Earlier, the Sensex had fallen over 300 points.

The yield on India’s 10-year benchmark bond closed at 7.84% compared with its Monday’s close of 7.815%. Bond yields and prices move in opposite directions.

Brent crude has fallen in 12 out of 17 sessions. Since 10 July, Brent crude has fallen 15%.

Since the beginning of this year, the rupee has lost 1.56%, while foreign institutional investors have bought $7.07 billion from local equity and $6.38 billion from bond markets.

The dollar index, which measures the US currency’s strength against major currencies, was trading at 97.359, down 0.13% from its previous close of 97.494.

Most of the Asian currencies closed higher. Thai Baht was up 0.30%, Indonesian rupiah 0.28%, Taiwan dollar 0.26%, Philippines peso 0.21%, and Singapore dollar 0.19%.

Source:- livemint.com