RBI policy turns out to be a non-event for forex and bonds markets

MUMBAI: The second quarter RBI policy on Tuesday turned out to be a non-event for both the foreign exchange and money markets. Policy measures were in line with market expectations and traders were not seen taking any outstanding calls.

At 11:35 hrs the 10-benchmark government securities were trading at 8.59%, down four basis points from early morning trades.

“The policy is turned out to be a non-event. It is on expected lines,” said Prasanna Patankar, a senior vice-president at STCI Primary Dealership.

“The 10-year benchmark government bond yields are expected to move in the range of 8.55-8.65%. But, the central bank has tried to ensure some liquidity in the market by way of easing some measures.”

As one of the policy measures, the RBI increased the liquidity provided through term repos of 7-day and 14-day tenure to 0.50 per cent from 0.25 per cent of total deposits in the banking system with immediate effect.

The Indian rupee recouped some of its early morning losses rising to 61.51 against the US dollar at 11: 35 hrs. But, traders refused to attribute the reason to any policy decision.

“The policy did not spring any surprise for the domestic currency market,” Navin Raghuvanshi, associate vice president at Development Credit Bank.

“The 10-20 paise movement was due to general course of trades. With the equity market turning in green, it helps rupee to strengthen against the greenback due to inflows. This is not due to any policy specific decision. One can expect the Rupee to trade in the broader range of 61.35-61.85 against the US dollar.”

RBI on Tuesday raised repo rate by 25 bps to 7.75 per cent in the September quarter monetary policy review. It also decreased MSF rate by 25 bps to 8.75 per cent.