Rupee closes weaker against US dollar at 67.46; bond yield falls to 3-year low

Mumbai: The Indian rupee weakened against the US dollar, while the benchmark 10-year bond yield closed at a three-year low on Tuesday, on anticipation of rate cuts on reduced monsoon deficiency and as global bond yield prices fell.

The home currency closed at 67.46, down 0.28% from its previous close of 67.27, while the benchmark 10-year bond yield fell to 7.39%—a level last seen on 20 June 2013, from its previous close of 7.425%.

The local currency opened at 67.35 a dollar and touched a high and a low of 67.32 and 67.51, respectively.

The 10-year bond yield has fallen in 12 out of the past 16 trading sessions. The yield opened at 7.426% and touched a low of 7.387%, in intraday trade on Tuesday.

Bond yields and prices move in opposite directions.

“The fine print of the pay commission awards and the possibility of a more dovish central bank governor have driven down bond yields in India to levels last seen in April. A drop in global bond yields, which fell as investors sought the safety of government securities following the Brexit vote, has also contributed to the drop in borrowing costs for the Indian government” Mint reported on Monday.

According to India Meteorological Department (IMD) the overall monsoon deficiency has reduced to 2% till Monday from 13% a week back. The next Reserve Bank of India (RBI) policy will be on 9 August.

India’s benchmark Sensex index fell 0.41%, or 111.89 points, to close at 27,166.87. So far this year, the Sensex has gained 4%.

Most Asian currencies fell, led by South Korea’s won, as investors bought the yen and other safe haven assets ahead of the US payroll data.

South Korean won declined 0.73%, Malaysian ringgit 0.68%, Indonesian rupiah 0.59%, Philippines peso 0.44%, Singapore dollar 0.3%, Taiwan dollar 0.25%, Thai baht 0.23%, China offshore spot 0.21% and China renminbi 0.09%. However, Japanese yen added 0.74%.

Investors hope that the central banks will provide stimulus to offset a likely downturn triggered by Brexit. The Bank of England has indicated it could provide stimulus measures to support the economy in the coming months. Many investors also expect the European Central Bank and the Bank of Japan to expand their monetary easing, Reuters reported.

So far this year, the rupee is down 1.96%, while foreign institutional investors (FIIs) have bought $2.92 billion in equity and sold $1.86 billion in debt markets.

The dollar index, which measures the US currency’s strength against major currencies, was trading at 95.558, down 0.1% from its previous close of 95.649.

Indian markets will be closed on 6 July on account of Ramzan. The US markets were closed on Monday on account of the US Independence Day.