The Hindu Business Line : Rupee weakens; bonds recover

The forex market saw the rupee weakening from the opening level of 45.32/33 against the greenback. Dealers said sustained buying of dollars by oil companies and other corporates such as Reliance and foreign banks fuelled its demand. State-run banks were buying at 45.35/37 levels while selling began at 45.45 levels. Exporters remained in the selling mode. The rupee touched the intra-day high of 45.28/29.

Market expectation is that rupee might reach 46.00 levels if there is buying pressure by PSU banks and corporates.

The forwards market had thin volumes with importers and corporates buying when the spot market started falling. The premium moved from lower to higher brackets. The six-month forward closed at 0.40 per cent (0.44 per cent) and the twelve-month forward closed at 0.42 per cent (0.43 per cent).

The bond prices opened higher on the back of improved market sentiment. The market opened about 50-80 paise higher and closed above Tuesday's levels.

The improvement in the market sentiment could be attributed to a few signals. The lower-than-expected US CPI numbers announced on Tuesday evening which led to a slide of about 20 basis points in the US bond yields. Also, expectation of a well bid auction as RBI has not paid any underwriting commission to the primary dealers was a positive signal.

The benchmark 8.07 per cent 2017 paper opened at Rs 120.10/15, went up to Rs 120.40 before closing at Rs 120.60. The 10-year benchmark moved up about 50 paise from the previous levels to close at Rs 115.17/20.

The call rates were in the range of 4.25 - 4.50 per cent. Under the LAF window, the RBI received and accepted 39 bids worth Rs 9,150 crore. In the 91-day treasury bills auction results, 33 bids worth Rs 2,000 crore were accepted from 43 bids received.