Rupee Strengthens on RBI Rate Cut; Swap Rates Drop

January 29, 2013 1:09 PM IST

Indian swap rates fell while the rupee strengthened after the central bank cut interest rates by 25 basis points as expected, while also delivering a surprise cut in the cash reserve ratio.

The 1-year overnight index swap (OIS) rate, which is also sensitive to liquidity conditions, fell 5 basis points (bps) to 7.54 percent from levels before the decision. The 5-year OIS rate fell 3 bps to 7.14 percent, according to traders.

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The Indian rupee strengthened to 53.79 from around 53.84 before the decision, while the NSE's banking sub-index was up 0.3 percent.

The 10-year bond yield was down 1 bp as the cut in the cash reserve ratio reduced the prospects of bond purchases via open market operations.

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