Rupee may remain volatile

Indian currency opened on flattish gains after it depreciated on Tuesday following the airstrike on terror camps in PoK. Political developments are expected to have a strong effect on currency and bond markets, in the short-term.

The home currency fell on Tuesday after tensions escalated between India and Pakistan. Indian Air Force jets destroyed terrorist camps in Pakistan occupied Kashmir (PoK). Equity markets took a jolt on Tuesday but recovered in Wednesday's morning session. The same reaction was seen in the bond markets.

Sovereign bond trades will take cues from the Reserve Bank's announcement on open market debt purchases for the month of March. The central bank has decided to buy bonds under open market operations for an aggregate Rs. 25,000 crore during the first fortnight of March, via two auctions of Rs. 12,500 crore each, RBI stated in a release on Tuesday. 
  
Liquidity conditions will be monitored and depending on the assessment, RBI will consider further liquidity operations and the choice of instruments, the central bank added. The yield on the new 10-year bonds ended one basis point higher on Tuesday to 7.42 per cent. 
  
Going ahead, political developments will have a strong effect on currency and bond markets. Both will also take cues from geopolitical progress between China and the US along with North Korea. 
  

On Wednesday, after news of Pakistani jets violating Indian air space, rupee gave up its gains. At 11:40 hours, the rupee saw losses around 0.12 paise against the US dollar to trade at Rs. 71.19 per dollar.