Rupee extends losses against dollar, bonds gain

MUMBAI: The rupee lost nearly half a percent to the dollar in a choreographed southward journey as fear of higher oil prices and rising US treasury yields continue to haunt overseas investors and domestic importers.

The rupee closed at 68.01 Friday versus 67.70 a day earlier.

During the day, it dipped as much as 68.08 – the near 16-month low level.

“Elevated oil prices and US Treasury yields are driving the negative sentiment in emerging markets like India,” said Param Sharma, chief executive at NSP Forex, a Mumbai-based firm. “The central bank is trying to curb the rupee’s drastic fall beyond the 68 level.”

“The volume of unhedged imports is adding to dollar demand as well,” he said.

Many Indian importers did not cover their overseas liabilities when the rupee was relatively stable against the dollar. Hedging comes with a cost that importers try to save when the exchange rate does to turn out to be volatile.

The bond market whipsawed showing early gains during the day. The benchmark yield dipped as much as 12 basis points amid speculation of new government measures. Bond yields and prices move in opposite directions.

“Market was expecting some positive government announcement that was expected to improve market condition,” said Naveen Singh, head of government securities trading at ICICI Securities PD. “But, finally it did not come reversing early gains.”

The gauge closed at 7.83% compared with 7.88% Thursday.