The Hindu Business Line : Rupee down 20 paise; gilts dip

MUMBAI: The domestic currency closed at 43.98/99 per dollar on Thursday, around 20 paise weaker than its previous day close of 43.79/80. Markets were closed on Wednesday due to a public holiday.

Dealers said the rupee fell due to the on-going cash-dollar shortage in the market fuelled by significant RBI intervention in terms of absorbing excess dollar liquidity.

Another reason was that the dollar gained strength overseas on account of a hardening in the US g-sec yields which were driven up on expectations of a hike in interest rate, according to dealers.

After opening the day at 43.77/79, the rupee slipped sharply to touch an intra-day low of 44.10 before recovering marginally to end a notch higher.

"There is a lot of short-covering happening across the board which is why the rupee is under pressure. We can even expect it to test 44.25-44.50 levels in the next couple of days. However, the medium term outlook for the rupee remains one of appreciation," said a dealer with a private sector bank.

Meanwhile, in the forwards market even the one-year premia slipped into discount at - 0.25 per cent (0.10 per cent). The six-month premium was also trading at a discount at - 0.60 per cent (-0.11 per cent), along with the three month premium ending at - 1.05 per cent (0.40 per cent).

Bond prices opened weaker on the news of a hardening in the yields of US Government securities, but gained some lost ground on RBI's cancellation of the Rs 5,000 crore auction scheduled for the period April12-20.

The 8.07 per cent 2017 paper opened weaker at Rs 125, but gained back to end the day at Rs 125.30. Similarly, the 6.25 per cent 2018 paper opened at Rs 108.10, as against its previous closing at Rs 108.40. However, towards close, the paper bounced back to end at Rs 108.36/40.

Dealers said there was some amount of selling pressure in the morning, with mutual funds and PDs offloading securities in the market. Nevertheless, towards late afternoon, buying interest from across the board buoyed the bond prices.

"There is a good amount of liquidity in the system, so there is not much cause for concern at this point," said a bond dealer.

Call rates hovered at around 4.25 per cent levels in the inter-bank market. In the seven-day fixed rate repo under the LAF, the central bank received and accepted 45 bids amounting to Rs 15,580 crore at the rate of 4.50 per cent.