The rupee broke its five-day winning streak and government bond yields rose, tracking the rise in crude oil prices and US Treasury yields following West Asia tensions, said dealers. The rupee fell to 92.94 per dollar during the day; however, it regained some strength by the end of trade, likely on the back of intervention by the RBI via dollar sales. It settled at 92.66 per dollar, against the previous close of 92.58 per dollar.
The yield on the benchmark 10-year government bond rose by 6 basis points to settle at 6.96 per cent.
“The Indian rupee’s five-day rally came to a grinding halt, retreating in tandem with its Asian peers. The currency faced a double whammy of rising crude prices and relentless selling by foreign investors. Domestic equities saw a 23rd consecutive session of net selling by foreign institutional investors, maintaining steady pressure on the local rupee,” said Dilip Parmar, senior research analyst, HDFC Securities.
Despite US President Donald Trump pausing for two weeks to allow room for negotiations, the situation remained tense. Iran’s Islamic Revolutionary Guard Corps said shipping through the Strait of Hormuz had halted following Israeli strikes in Lebanon, which it described as a violation of the ceasefire. However, the Trump administration and Israeli Prime Minister Benjamin Netanyahu said the strikes against Hezbollah in Lebanon were not covered under the ceasefire arrangement between the US and Iran.
Brent crude oil prices rose to $98.15 per barrel, against the previous day’s $94.39 per barrel. The yield on the benchmark 10-year US Treasury bond rose by 4 basis points to 3.69 per cent.
Additionally, it was the last day for banks to square up their currency arbitrage positions. The central bank has capped banks’ daily net open forex positions at $100 million, overriding earlier internal limits linked to bank capital.
“Tomorrow is the last day for banks to square up their positions before the RBI deadline expires (curtailing their overnight positions to $100 million). There was a huge arbitrage between exchange and OTC amounting to 50 paise as banks squared up their positions in OTC and bought the same in exchange,” said Anil Kumar Bhansali, head of treasury and executive director, Finrex Treasury Advisors LLP.
