The Hindu Business Line : Rupee recovers; gilts decline

MUMBAI: The domestic currency closed around 20 paise stronger at Rs 45.8450/8600 on Wednesday as against its previous close of Rs 46.0450/0550 on the back of good dollar inflows and underlying positive sentiment on the eve of the Union Budget.

"The market seems to have taken the view of a appreciating trend of the domestic currency on account of positive comments made in the Indian Economic Survey with respect to liberalisation of the FII and the FDI flows. The market participants are expecting the budget to be pro-reform with the rupee touching Rs 45.50-45.60 levels soon", said a senior dealer at a private sector bank.

The six-month forward closed at 0.96 per cent (1.16 per cent) and the 12-month forward closed at 0.91 per cent (1.06 per cent).

Bond prices took a hit in late afternoon trades as sentiment weakened with concerns of a hardening in interest rates, higher inflation rate and larger fiscal deficit looming large. The 7.38 per cent 2015 paper opened at Rs 112.30/35 rose to Rs 112.50 before it dipped to figure of Rs 112.00. In the longer end 8.07 per cent 2017 the fall was more pronounced as it drove down to Rs 117.90/95 from Rs 118.35.

The trading was largely subdued said dealers, with most market participants such as foreign banks and primary dealers evincing buying interest in the morning, and later exiting from the market.

In the 364-day Treasury bill auction 28 bids were accepted worth Rs 2,000 crore at the cut-off price of Rs 95.60, while in the 91-day Treasury bill auction 16 bids with Rs 2,000 crore were accepted at the cut-off price of Rs 98.90.

The call rates were in the range of 4.10 to 4.25 per cent. Under the LAF window, the RBI received and accepted 28 bids worth Rs 4,660 crore.