The Indian rupee on Wednesday pared some of its gains from its two-month high against the US dollar, after local equity markets fell over 280 points.

At 2pm, the home currency was trading at 66.77 a dollar, up 0.12% from its previous close of 66.84. The rupee opened at 66.68 a dollar and touched a high of 66.67, a level last seen on 9 June.

The 10-year bond yield hit a seven-year low and was trading at 7.09%, a closing level last seen on 23 September 2009, from its previous close of 7.124%.

Since 1 July till date, foreign institutional investors (FIIs) bought $2.25 billion in equity and $960.05 million in debt.

India’s benchmark Sensex index fell 1% or 282.27 points to 27,802.89. So far this year, it has gained 6.5%.

So far this year, the rupee is down 0.9%, while FIIs have bought $5.21 billion in equity and sold $964.30 million in debt markets.

The Reserve Bank of India (RBI) left its key policy rate unchanged on Tuesday taking cognisance of the recent rise in inflation which puts the consumer price index uncomfortably close to the upper tolerance threshold of 6% as mandated by the government. The cash reserve ratio was also kept unchanged at 4%.

However, RBI governor Raghuram Rajan emphasised that the RBI would continue to infuse liquidity. Indeed, in a departure from his earlier statements, Rajan downplayed the recent improvement in liquidity and said the RBI has erased just 40% of the structural liquidity deficit. He said the recent surplus in liquidity was owing to seasonal factors and the RBI will purchase bonds from the open market to buttress this point.

Asian currencies gained. South Korean won was up 1%, Taiwan dollar 1%, Malaysian ringgit 0.81%, Japanese yen 0.45%, Philippines peso 0.32%, Thai baht 0.32%, Singapore dollar 0.22%, China renminbi 0.19%, China offshore 0.17% and Indonesian rupiah 0.12%.

The dollar index, which measures the US currency’s strength against major currencies, was trading at 95.831, down 0.36% from its previous close of 96.183.

Sources :livemint.com