Mumbai: India's rupee reversed losses on speculation exporters repatriated earnings to benefit from the currency's slide to a five-month low.
The rupee rose 0.1 per cent to 61.1450 per dollar in Mumbai, prices from local banks compiled by Bloomberg show. The currency touched 61.74 earlier, the weakest level since March 5, as US President Barack Obama's authorisation of air strikes in Iraq led to concern escalating geopolitical tensions will prompt investors to shun emerging-market assets.
"Exporters selling dollars helped the rupee recover after geopolitical tensions caused a panic this morning, hitting all emerging-market currencies," Vikas Babu, a foreign-exchange trader in Mumbai at state-run Andhra Bank, said by phone. The rupee weakened as much as 0.8 per cent earlier in the day.
The yield on the 8.4 per cent government bonds due 2024 climbed to as high as 8.68 per cent before ending at 8.64 per cent, little changed on Friday, according to the central bank's trading system. The rate jumped 11 basis points, or 0.11 percentage point, this week amid speculation the central bank will refrain from cutting interest rates after it flagged risks to its inflation target.
Obama authorised the strikes against militants to prevent genocide in Iraq, deepening risks as Russia retaliated against US and European sanctions by banning some food imports.
The rupee's one-month implied volatility, a gauge of expected moves in the exchange rate used to price options, jumped 18 basis points to 7.94 per cent on Friday.
Three-month offshore non-deliverable forwards fell 0.1 percent to 62.24 per dollar, data compiled by Bloomberg show. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars.