Rupee Recovers after Hitting Life-Time Low of 61.21 vs US Dollar

• RBI-SEBI Check Speculators

• Sovereign Bonds on the Lines of IDB in the 1990s to Bring in Forex on the Anvil

The Indian rupee opened stronger on Tuesday while bond yields dropped, following measures by the central bank and the market regulator to curb speculative trading in foreign exchange derivatives.

India’s regulators toughened rules for derivatives trading in the currency market in a bid to arrest the steep decline of the rupee, which fell to a record low of 61.21 against the dollar on 8 July before recovering.

The rupee has the distinct honour of achieving the status of Asia’s worst performing currency.

Bond yields too fell as prices rose to reflect declining currency value. Benchmark 10-year bond yield dropped 7 basis points at open to 7.50 percent, while the most-traded 8.33 percent 2026 bond yield fell 6 bps to 7.68 percent.

The rupee fell to a record low while bond yields surged on Monday, exacerbating fears about the funding of the current account deficit and sending policy makers scrambling to find quick fix solutions beyond sporadic interventions. (Appointing world money market savvy Chief Eco Advisor Raghuram Rajan as RBI governor is also being considered).

Dealers said the RBI, which intervened to defend the currency during the session, could mandate that refiners buy dollars via a separate window and not in currency markets, a measure that would help ease pressure on the rupee.

Meanwhile, Prime Minister Manmohan Singh will meet industry leaders on July 29 to discuss the rupee, FM Chidambaram is rushing to the US to bring in from Monday in a foreign direct investment, especially in infrastructure to shore up reserves.

Efforts to contain the rupee’s slide highlight the vulnerability of a country dependent on capital inflows to fund a current account deficit that hit a record high of 4.8 percent in the fiscal year ended in March.