Triggered by weak index of industrial production (IIP) and high consumer inflation numbers, the rupee dropped to its three-week low of 54.11 a dollar on Tuesday. However, the currency recovered from the fall to end flat at 53.85 a dollar, compared with its previous close of 53.86. It had opened at 53.88 against the dollar.
"Because of bad IIP data, the rupee went from 53.86 to 54 figure levels," said Lata Subramaniam, senior dealer at State Bank of Travancore. "The rupee was rangebound for quite sometime after that IIP data release." Subramaniam said the rupee came off lows due to recovery in the euro.
The euro was weak early in trade but recouped losses after the yen fell against it. The yen weakened after a statement by the Group of Seven countries (G-7) said markets should determine exchange rates and disorderly exchange rate movements and excess volatility could hinder economic stability.
Industrial output contracted 0.6 per cent in December 2012, mainly due to muted activities in manufacturing and mining. The consumer price index advanced 10.79 per cent annually in January against 10.56 per cent rise of December. The rise was on account of higher prices of vegetables, edible oil, cereals and protein-based items. The Street is now awaiting the wholesale price index inflation data on Thursday for a clearer view on rate cut prospects.
Bonds remain lower
Government bonds remained lower on selling pressure from banks and companies.
The 8.15 per cent government security maturing in 2022 fell to Rs 101.83 from Rs 101.89 previously, while its yield inched up at 7.87 per cent from 7.86 per cent.
Call rates end down on lack of demand
Overnight rates ended weak on lack of demand from borrowing banks. It finished at 7.75 per cent from 7.85 per cent yesterday.