Financial Daily from THE HINDU group of publications
Tuesday, Nov 08, 2005


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Money & Banking - Forex

Rupee plunges; bonds decline

Our Bureau

MUMBAI: The rupee slumped to a fresh low against the greenback sparked by panic buying as all major currencies fell against the dollar.

The rupee opened at a gap at 45.69/70, down from Friday's close at 45.53/54. It then fell further to end the day at 45.90/91.

Mr L.V. Prasad, Head, Corporate sales, IndusInd Bank, said that the rupee was tracking the euro, which dipped below $1.18. "Panic buying of dollars began when the euro touched $1.1783. Importers were covering themselves for the near term, while exporters were cancelling forward contracts. There is now a demand and supply mismatch," said Mr Prasad.

Dealers said that the dollar is strengthening against all the major currencies on the back of higher US interest rates and investment being diverted to a high yielding currency. In the bond market, prices fell by around 15-30 paise on account of tightening liquidity.

Dealers said with the Rs 8,000-crore auction on Tuesday there would be further pressure on the liquidity in the system. In the one-day reverse repo, under the LAF, RBI received and accepted 13 bids amounting to Rs 6,190 crore.

The 7.37 per cent - 9 year-2014 paper opened at Rs 102.48 (6.98 per cent YTM) and closed at Rs 102.34 (7 per cent YTM), lower than Friday's Rs 102.50 (6.97 per cent YTM).

The 10.25 per cent -16 year-2021 paper opened at Rs 125.51 (7.45 per cent YTM) and ended at Rs 125.37 (7.46 per cent YTM), down from Friday's close at Rs 125.53 (7.45 per cent YTM).

The call rate closed at 5.60-5.80 per cent (six per cent). In the CBLO market, there were 303 trades for Rs 11,248.65 crore in the rate range of 5.40-6 per cent.

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