Swati Bhagat

MUMBAI, (Reuters) – The Indian rupee slowly recovered from Tuesday’s record-breaking low. However, the central bank intervened and bond yields edged up in line with the rise in global prices.

At 0805 GMT the partial convertible rupee traded at 77.63/64 dollar, down from its closing of 77.45 Friday. This session, the rupee fell to an all-time low of 77.7975.

According to traders, the central bank began selling dollars through state-run banks at 77.75 rupee levels. This helped the currency gain some ground.

Adam Hoyes of Capital Economics assistant economist, stated in a note that “given the RBI’s ample FX reserves we expect the rupee will remain more stable than other EM currencies and weaken less against the greenback over he next couple years.”

Traders reported that RBI had been actively in spot and futures markets for the last few weeks in order to reduce volatility.

According to Gaurang Somaiya (foreign analyst, Motital Oswal Financial Services), “Rupee dropped to an all-time low” as the dollar strengthened and global crude oil prices traded higher.

We expect momentum to continue positive for the and will quote between 77.40 & 78.20.

Analysts believe that the current rise in inflation, both global and domestic, has exacerbated bearishness about the currency as well as pushed up yields on bonds.

India’s annual wholesale inflation rose to 15.08% from the 14.55% in March. It remained in double digits for the 13th consecutive month, data released by government on Tuesday.

Inflation based on consumer prices rose to 7.79% in April, which was higher than anticipated compared to a previous year. It also remained at or above the threshold of 6%, as data from last week indicated.

The RBI could be forced to increase rates once again by economists due to the inflation print. It had previously raised its rate unexpectedly by 40 basis point in an out of turn meeting this month.

India’s 10-year benchmark yield bond was at 7.36% as of today, up four basis points.

Futures dropped 18 cents or 0.16% to $114.06 per barrel at 0726 GMT.

After recent losses, the rally in Indian shares helped to prevent another slide in rupee. Both the benchmark BSE share and wider NSE index rose more than 2%.

However, foreign funds have sold Indian stocks and bonds. So far, foreign funds have net sold around $20 billion of Indian shares and $2 billion of debt in 2022.