The rupee appreciated today in the backdrop of a weak dollar index
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The rupee appreciated about 27 paise on Tuesday to close above the 86 per dollar mark amid a weak dollar and domestic equity markets making smart gains even as the Government Securities (G-Sec) market saw a mild rally on the back of easy liquidity and hopes of more rate cuts by RBI on account of easing retail inflation.

The Indian unit (INR) closed at 85.7725 per US dollar (USD) against previous close of 86.04 (on April 11^th). The rupee opened stronger at 85.8750 per USD, about 17 paise higher vs previous close, and tested a high/low of 85.58/85.8750.

“The rupee appreciated today in the backdrop of a weak dollar Index. Forward premiums also came down due to the narrowing interest rate differential between India and the US. US Treasury yields are sticky, whereas our G-Sec yields are softening. At 85.58 levels, there was good importer buying,” said V Rama Chandra Reddy, Head – Treasury, Karur Vysya Bank.

G-Sec yields thaw

Yield of the benchmark 10-year Government Security (6.79 per cent GS 2034) thawed to close at three-year low of 6.41 per cent (from previous close of 6.44 per cent) in the wake of ample liquidity, with the RBI last week announcing that it will conduct Open Market Operation (OMO) purchase of G-Secs aggregating ₹40,000 crore on April 17.

Overall, yield of the benchmark Security has softened 17 basis points (with its price rising by about a rupee) from 6.58 per cent on March 28^th, the last trading day of FY25.

Reddy noted that the recent 25 basis points repo rate cut, change in stance, dovish monetary policy outlook and continuing liquidity injection measures in the form of OMO purchase are having a softening effect on the yields.

Nuvama Wealth, in a report, observed that the 10-year benchmark opened lower tracking a sharp fall in treasury yields overnight along with an OMO purchase announcement of ₹40,000 crore (to be held on 17th April).

“Yields were ranged ahead of the CPI inflation release. The headline inflation came in weaker than expected at 3.34 per cent vs 3.5 per cent (expected) and 3.6 per cent previous, with continued disinflation in food (helped by sharper deceleration in vegetable prices).

“Following inflation data release, some profit booking was seen with the core CPI inflation edged higher to 4.2 per cent (driven by health, transport, communication, and education segments). However, this upside in yields did not sustain. The 10Y point closed trade at 6.41 per cent vs 6.44 per cent previous,” per the report.

Published on April 15, 2025