Rupee regains 72 level on bond issues, inflows – Times of India

MUMBAI: The rupee strengthened on Thursday to regain 72 levels intraday and touch the session’s high of 72.96 before closing at 73.07 — two paise higher than Wednesday’s close of 73.09. The last time the rupee was at 72 levels was in June. The currency was the strongest against the dollar on February 24 this year when it closed at 72.33.
Similar to the equities market, the gain in the rupee has been sharp and sudden with an appreciation of 1.5% in five trading sessions. Dealers said that the domestic currency was buoyed by positive sentiment in the equities market. Sustained inflows from foreign institutional investors are expected to result in an assured supply of dollars, although the current account has come under pressure with rising imports.

Dealers said that some chunky inflows are expected from international bond issues by banks and corporates (see graphic). Axis Bank on Thursday said that it has raised $600 million (Rs 4,380 crore) through the sale of sustainable additional tier-1 (AT1) bonds. The dollar-denominated, Basel III-compliant AT1 notes were finally priced at 4.1%, 30 basis points (100bps = 1 percentage point) lower than the initial price guidance. This marks it as a highly successful return for Axis Bank to the international bond markets after a 4-year hiatus. This is the second ESG AT1 bond (referring to environment, social and governance impact) from Asia.
According to Emkay Global Financial Services lead economist Madhavi Arora, while the bond issues, foreign portfolio investment inflows and general weakness in the dollar after the US Fed meeting have been positive for the rupee, a surprise factor has been the RBI’s handsoff strategy.
She added that this strategy could be because the central bank does not want to add to liquidity in the money markets by purchasing dollars. Also, selling dollars at higher levels could be a treasury strategy for the RBI to make some profits. Finally, a stronger rupee takes the edge off imported inflation.