The Indian rupee on Tuesday afternoon strengthened sharply following cues from other Asian currencies, but the Reserve Bank of India had to intervene too, say currency dealers.

At 4.07 pm, the home currency was trading at 65.93 a dollar, after strengthening as much as 65.92 a dollar in the intraday. The intraday gain of 0.9% was rupee’s steepest gain since 18 November, 2013.

Rupee had opened at 66.50a dollar, from its previous close of 66.65 a dollar. The rupee had touched a low of 66.77 a dollar, prompting the Reserve Bank of India to intervene.

“RBI pulled rupee to 66.70 level and the market got the message. Rupee strengthened rapidly after that,” said a senior currency dealer with a foreign bank who did not wish to be named.

Meanwhile, Bloomberg news agency reported that RBI may have asked the oil marketing companies not to buy dollars directly from the market, which may have an impact on the sentiment and strengthened rupee, said the dealer.

China’s central bank cut its benchmark lending rate for the fifth time since November and lowered the amount of cash banks must set aside, stepping up efforts to cushion a stock market rout and deepening economic slowdown.

The one-year lending rate will drop by 25 basis points to 4.6% effective Wednesday, the Beijing-based People’s Bank of China said on its website Tuesday. The one-year deposit rate will fall by 25 basis points to 1.75%, Bloomberg report said.

Most of the Asian currencies were trading higher. Malaysian ringgit was up 1.1%, Singapore dollar 1%, Taiwan dollar 0.9%, Philippines peso 0.5%, Thai baht 0.4%, China Offshore spot 0.4%, South Korean won 0.28%. However, Japanese yen was down 1.1% and China Renminbi 0.14%.

Asian markets closed down. Hong Kong’s Hang Seng was up 0.7%, China’s Shanghai Composite 7.6% down and Japan’s Nikkei Stock Average was down 4%. The benchmark Sensex index rose 0.82% or 210.91 points to 25,952.47 points.

The yield on India’s 10-year benchmark bond was trading at 7.836% compared with its Monday’s close of 7.891%. It opened 7.895% and touched a high of 7.911% -- level last seen on 29 June. Bond yields and prices move in opposite directions.

So far in August, the rupee has fallen over 2.5%. It has been the worst month for the currency in at least two years. Since the beginning of this year, the rupee has lost 4.5%, while foreign institutional investors have bought $6.46 billion from local equity and $6.33 billion from bond markets.

The dollar index, which measures the US currency’s strength against major currencies, was trading at 93.567, up 0.25% from its previous close of 93.332.

Source:livemint.com