Mumbai: Indian rupee and bond prices erased all the morning gains was trading little changed after local equity markets fell over 250 points. At 9.54 am, the rupee was trading at 68.40 a dollar, up 0.03% from its previous close of 68.43. The currency opened at 68.39 a dollar and touched a high of 68.27. The 10-year bond yield stood at 7.707%, from its Wednesday’s close of 7.701%. Bond yields and prices move in opposite directions.
On Wednesday, the RBI raised policy rates by 25 basis points to 6.5% amid inflationary pressures. Earlier in its June meeting, the central bank had hiked the rate by 25 basis points to 6.25%.
“The RBI has delivered back-to back hikes while maintaining a neutral stance, as expected. In our view, its reluctance to shift to a ‘tightening’ stance suggests that it is not convinced that a series of hikes is warranted, possibly because of global growth risks or because it expects inflation to gradually taper...... we expect the RBI to wait and see what kind of impact the already delivered hikes will have. Therefore, we expect rates will be left unchanged through FY19”, said Nomura in a note to its investors.
Benchmark Sensex Index fell nearly 200 points.
So far this year, the rupee has weakened 6.7%, while foreign investors have sold $413.60 million and $6 billion in equity and debt markets, respectively.
Most Asian currencies fell after the Federal Reserve stuck to a plan to gradually lift borrowing costs. Fed officials left US interest rates unchanged and said economic activity has been “rising at a strong rate.” The commentary was seen as backing bets for a rate hike in September, which would be the third this year.
South Korean won was down 0.26%, Singapore dollar 0.21%, Malaysian ringgit 0.13%, China Offshore 0.07%, Thai Baht 0.07%, China Offshore 0.07%, Taiwan dollar 0.07%, Indonesian rupiah 0.06%. However, Japanese yen was up 0.1% and China renminbi 0.08%.
The dollar index, which measures the US currency’s strength against major currencies, was trading at 94.708, up 0.05% from its previous close of 94.661.