Similar to the equity market, there has been a sharp and sudden gain in the rupee with the rupee rising 1.5% in five trading sessions. Traders said a positive sentiment in the stock market led to the rise in the domestic currency. The continued inflow of foreign institutional investors is expected to ensure supply of the dollar, although the current account has come under pressure due to rising imports.
Dealers said some major inflows are expected from international bond issues by banks and corporates (see graphic). Axis Bank on Thursday said it has raised $600 million (Rs 4,380 crore) through the sale of durable additional tier-1 (AT1) bonds. dollar denomination, Basel III-compliant AT1 notes eventually cost 4.1%, 30 basis points (100bps = 1 percentage point) below initial price guidance. This marks a highly successful return to the international bond markets after a gap of 4 years for Axis Bank. This is the second ESG AT1 bond (in terms of environmental, social and governance impact) Asia.
According to Emkay Global Financial Services chief economist Madhavi Arora, while bond issuances, following foreign portfolio investment inflows and general weakness in the dollar US Fed The meeting has been positive for the rupee, a surprising factor being the RBI’s handoff strategy.
He said this strategy could be because the central bank does not want to add liquidity to the money market by buying dollars. Also, selling dollars at higher levels could be a treasury strategy for RBI to make some profit. In the end, a stronger rupee takes the edge off imported inflation.
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