Date:27/12/2005 URL: http://www.thehindubusinessline.com/2005/12/27/stories/2005122702840600.htm

Back Rupee firmer; gilts lacklustre

Our Bureau

MUMBAI: The rupee strengthened against the dollar on Monday on the back of foreign institutional investor (FII) inflows.

The domestic currency opened at 45.13 and touched an intra-day high of 45.02. It closed at 45.0450/05, up from Friday's level of 45.1550.

Dealers said that domestic trade was thin as overseas markets were closed.

"FII inflows pushed up the rupee, though some import-related demand for dollars was also seen," said a dealer at a private bank.

According to the treasury head of a private bank, the rupee could trade in the wide range of 44.80-45.70 during the week since thin trade could induce volatility.

In the forward market, the 12-month closed at 1.20 per cent (0.90 per cent) and the 6-month ended at 1.66 per cent (1.14 per cent).

The bond market was lacklustre due to liquidity shortage and tightness in call rates.

Bonds opened about six paise higher than the previous close, as the 10-year US Treasury gained on Friday. But call rates, which touched 7 per cent in the day's trade, and liquidity shortfall pushed prices down. However, towards the end of the day, there was bargain buying by private banks, due to which bonds closed flat.

"There was very little activity in the G-Secs market and total volume was around Rs 1,500 crore," said a dealer with a private bank.

The 8.07 12-year 2017 paper opened at Rs 106.48 (7.20 per cent YTM) and ended at Rs 106.40 (7.21 per cent YTM), slightly lower than Friday's close of Rs 106.435 (7.21 per cent YTM).

The 10.25 16-year 2021 paper opened at Rs 126.28 (7.36 per cent YTM) and closed at Rs 126.21 (7.38 per cent YTM), almost unchanged from Friday's level of Rs 126.19 (7.38 per cent YTM).

The call rate closed at 6.50-6.75 per cent(5.30-5.40).

In the one-day reverse repo auction, RBI received and accepted one bid amounting to Rs 125 crore, and in the repo auction it accepted 22 bids for Rs 10,925 crore.

In the second auction, RBI received one bid for Rs 10 crore in the reverse repo auction and 19 bids for Rs 6,755 crore in the repo auction.

In the CBLO market, there were 320 trades for Rs 10,695.10 crore in the range of 6.25-6.50 per cent.