Date:11/10/2005 URL: http://www.thehindubusinessline.com/2005/10/11/stories/2005101102900600.htm

Back Rupee sheds 35 paise; bonds dip in tandem

Our Bureau

MUMBAI: The rupee fell by 35 paise on Monday to touch another 10-month low on strong dollar demand and lack of support from the Reserve Bank of India.

There was also demand for the greenback in the non-deliverable forward market, as investors went in for arbitrage between the offshore and onshore markets.

The rupee opened at 44.40/42 and within seconds, it fell to 44.50. For most of the day, the rupee traded in the range of 44.57-44.63. In the second half of the day, the rupee depreciated further, finally ending at 44.75/76 against Friday's close 44.39/40.

In the last two sessions alone, the rupee has lost 47-48 paise against the dollar. Dealers said the rupee might cross the 45-level in a couple of sessions.

"Dealers are waiting for a signal that RBI wants the rupee to stabilise at some level. Once the initial supply comes from RBI, exporters would be willing to bring in more supplies," said a dealer with a private bank.

Even if the rupee does not appreciate too much from these levels, it may at least shift to a lower range against the dollar — between 43.80-44.50/60, the dealer said.

However, in the forward premia market, the rupee strengthened against the dollar, with the six-month premium closing at 0.70 per cent (0.82 per cent) and the 12-month premium closing at 0.62 per cent (0.7 per cent).

Bond prices too fell due to the weakening of the rupee. The bond market opened 5-10 paise higher, as US yields were down and the oil price was off its highs.

The decline in the value of the rupee is a concern for the bond market, because of fears that the oil bill may rise and add to inflationary pressures, said a dealer with a private bank. The 7.37-nine-year-2014 paper opened at Rs 102.22 (7.0189 per cent) and closed at Rs 102.09 (7.03 per cent yield to maturity/YTM), a tad lower than Friday's level of Rs 102.10 (7.04 per cent YTM). During the day, it touched an intra-day high of Rs 102.24.

The 10.25 16-year 2021 paper opened at Rs 125.25 (7.48 per cent YTM) and ended trade at Rs 125.12 (7.49 per cent YTM), up from the earlier close of Rs 125.21 (7.48 per cent YTM).

The call rate closed at 5-5.10 per cent (5-5.05 per cent). In the one-day reverse repo auction, RBI received and accepted 30 bids amounting to Rs 21,510 crore.

In the CBLO market, there were 254 trades for Rs 12,808.95 crore in the rate range of 4.80-5.18 per cent.