Rupee steady; foreign bond buying, rate hike ease pressure

Reuters: The rupee ended steady on Monday due to dollar conversions as foreigners bought bonds after the central bank’s policy rate hike offset importer demand for the greenback, dealers said. The central bank raised its main interest rates by 50 basis points each in a surprise move aimed at curbing stubbornly high credit growth that is adding to concern about inflationary pressures.

One-week rupee forwards, which have been acting as a proxy for the spot rupee, ended at 146.22/30 per dollar, hardly changed from Friday’s close of 146.20/23. The spot rupee is tightly managed by the central bank, and market participants use the forward market levels for guidance on the currency.

“Foreign investors seen buying bonds after the rate hike while some local investors were selling to make some profit,” said a currency dealer, asking not to be named.