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India Rupee Rises to Two-Week at 59.2250 per dollar After RBI Moves

India’s rupee advanced to the highest level in more than two weeks after the central bank raised two interest rates to support the currency. The benchmark government bond due 2022 fell for a fourth day.

The Reserve Bank of India increased the marginal standing facility rate and the bank rate to 10.25 percent from 8.25 percent, according to a July 15 statement. The monetary authority said also that it will sell 120 billion rupees ($2 billion) of bonds maturing between 2017 and 2030 through open-market operations tomorrow. The measures will stay in place at least until September, when the central bank may get clarity on when the Federal Reserve plans to pare its stimulus program, according to Kotak Mahindra Bank Ltd. (KMB)

The RBI is looking to “contain foreign-exchange volatility by squeezing out liquidity,” said Indranil Pan, an economist at Kotak Mahindra Bank in Mumbai. “Short-end rates are likely to rise to at least 10.25 percent, leading to a transmission to other interest rates in the economy.”

Bloomberg [1]

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