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Tuesday, Dec 13, 2005


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Rupee gains; bonds fall on liquidity worries

Our Bureau

MUMBAI: The rupee gained against the US dollar on Monday as it tracked the euro. Good inflows into the domestic equity markets also helped the Indian currency strengthen, said dealers.

The euro had strengthened on Friday due to which the rupee opened higher at 46.17/18. It fell to a low of 46.21 during the intra-day trade. However, then it edged up steadily to end trade at 46.11/12, up from the earlier close of 46.20/21.

Demand for dollars was also less today, said a dealer with a private bank. "Today was a feel-good factor for the rupee. If the euro maintains these levels, the rupee may strengthen further," he said.

The forward premia closed slightly higher, with the six-month premium ending at 0.9 per cent (0.89 per cent) and the one-year at 0.72 per cent (0.67 per cent).

The bond market saw prices fall by about 10-15 paise due to liquidity worries. The market is also worried about outflows arising out of the redemption of the Indian Millennium Deposits, scheduled for later this month.

The US Federal Commission's meeting scheduled for Tuesday is likely to indicate further firming up of interest rates, as the US economy is strengthening. This could translate into a domestic rate hike, said the dealers.

The 8.07-12 year-2017 paper opened at Rs 106.3 (7.2328 per cent YTM) and closed at Rs 106.26 (7.2373 per cent YTM), down 10 paise from Friday's level of Rs 106.33 (7.23 per cent YTM). The 10.25-16 year-2021 paper opened at Rs 126.14 (7.3858 per cent YTM) and ended trade at Rs 126.05 (7.39 per cent YTM), lower than the earlier close of Rs 126.15 (7.38 per cent). Call rates too were tight and closed at 5.75-5.80 per cent (5.35-5.40 per cent), with stray deals happening at 6 per cent.

In the first three-day reverse repo auction, the Reserve Bank of India received and accepted eight bids amounting to Rs 2,680 crore. In the second auction, it received and accepted six bids for Rs 1,345 crore.

In the CBLO market, there were 292 trades for Rs 14,189.3 crore in the range of 5.45-5.8 per cent.

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