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Tuesday, Oct 04, 2005

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Rupee weakens; bonds decline

Our Bureau

MUMBAI: The rupee slid to a month's low against the greenback on Monday in tandem with the fall in other major foreign currencies and amid fears fears that foreign institutional investors (FIIs) will ease investment in India.

The rupee opened at a gap at 44.08, lower than the previous closing at 44.01/02. It further fell to close the day at 44.13/14. Dealers said a fall of 100 points in the euro as well as other currencies such as the yen caused the rupee to open lower. Reports of a growing US economy and further hikes in the interest rate could have prompted the fall in currencies against the dollar, they said.

There was oil import-related demand as well.In the forward premia market, the 12-month contract closed at 0.76 per cent (0.72) and the six-month contract ended at 0.88 per cent (0.75).

Bond prices opened lower and continued to fall throughout the day due to the lack of buying support, said the dealers. There is a negative sentiment among market players with the rise in inflation, and US yields and crude oil prices continuing to be on the higher side. Prices fell by 15-25 paise on Monday.

The market was also anticipating a rate hike by the Reserve Bank of India and the bearish mood was reflected in the bond prices, said a dealer with a private bank. Volumes too were low at about Rs 2,000 crore. Out of this, Treasury bills amounted to Rs 600-700 crore. The 7.37 per cent nine-year-2014 paper opened at Rs 101.92 (7.07 per cent yield to maturity/YTM) and touched an intra-day low of Rs 101.8, before closing at Rs 101.93 (7.06 per cent YTM), lower from the earlier close of Rs 102.20 (7.02 per cent YTM).

The 10.25 per cent -16 year-2021 paper opened at Rs 125.26 (7.48 per cent YTM) and touched an intra-day low of Rs 125.09 and ended trade at Rs 125.22 (7.49 per cent YTM) against the earlier close of Rs 125.68 (7.44 per cent YTM).

Call rates were around 5.10 per cent (4.75-5 per cent). In the one-day reverse repo auction, RBI received and accepted 28 bids amounting to Rs 18,865 crore. In the CBLO market, there were 251 trades for Rs 13,042.5 crore in the rate range of 4.85-5.15 per cent.

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