Financial Daily from THE HINDU group of publications
Saturday, Sep 07, 2002
Money & Banking
Rupee falls sharply; gilts down
Mumbai: THE rupee lost 11 paise against the dollar on Friday following reports of air attacks on Iraq. The rupee closed at 48.5925/60 against the dollar as compared to Thursday's close of 48.48 in the forex market.
With news reports coming in of 100 US and UK aircraft having attacked air defence in Western Iraq, Brent crude oil prices were seen jumping on Friday.
With "the biggest attack on Iraq in four years'' oil companies were on Friday seen buying dollars to tackle the spike in Brent oil prices.
"The oil companies were trying to `hedge' their positions in the forex market on Friday, as early as possible,'' said a dealer in a bank.
The domestic currency opened at 48.4950/5050 touched an intra-day high of 48.4875 and an intra-day low of 48.5950.
In the forward premium market, reversing the trend of dipping forward premium, the six months premium closed higher at 4.08 per cent (3.99 per cent) and the twelve months premium closed at 4.05 per cent (3.92 per cent).
Demand for forward premium shot up with importers and corporates buying forward dollars in significant volumes, said a dealer.
The buying was done through State-run banks to cover `import obligations'. Fears of a depreciating rupee pumped up demand for forwards.
With war fears looming, bond prices closed lower by 20-30 paise on Friday across the board from Thursday's closing levels.
The first quotes of the day were lower than Thursday's closing levels, with players deliberately quoting lower. After touching intra-day lows, the prices however recovered, with news being filtered from speculative rumours.
The 7.40 per cent 2012 paper opened lower at Rs 101.70 from Thursday's close of Rs 101.85/90, touched an intra-day low of Rs 101.48/50 to close at Rs 101.54/55. The 9.81 per cent 2013 paper opened lower at Rs 119.10/15 from its previous close of Rs 119.20/25, touched an intra-day low of Rs 118.85 to close at Rs 118.90/95.
The long-term 8.07 per cent 2017 paper opened lower at Rs 105.40 from its earlier close of Rs 105.55/60, touched an intra-day low of Rs 105.20 and later recovered to Rs 105.35. The 7.46 per cent 2017 paper opened lower at Rs 100.45/50 from its previous close of Rs 100.65/60, touched an intra-day low of Rs 100.15/60 and recovered to close at Rs 100.34.
The market has adopted a `wait and watch' policy, with sentiment still bullish. There is an underwriting expected on Saturday for the approaching auction.
In spite of the war tensions and September 11 soon approaching, "Volumes traded were however normal, roughly between Rs 4,000-4,500 crore,'' said a dealer in a primary dealer.
In the inter-bank call money market, the call rates closed at 5.70-5.75 per cent after touching intra-day highs of 5.80 per cent with liquidity still comfortable in the system.
In the repo auction, the RBI received 9 bids worth Rs 6,900 crore all of which was accepted at the repo rate of 5.75 per cent. Friday being reporting day, the repo amounts were observed to be low, said a dealer.
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