The Hindu Business Line : Rupee plunges; gilts decline

MUMBAI: Driven down by a serious demand-supply mismatch of dollars in the foreign exchange market, the rupee ended at 45.66/68 against the dollar on Friday, a five-and-a-half month low.

On Thursday, the rupee ended at 45.49/51.In a largely demand driven market, the currency experienced its lowest close since January 2 when it had touched 45.695/705 at the day's end, according to analysts.

All market players were aggressively mopping up the greenbacks, including oil corporates, importers, FIIs and both foreign and State-run banks. In the offshore Non-deliverable funds (NDF) market heavy demand accounted for the rise in dollar, said a dealer.

The RBI intervened sporadically through the public sector banks but did not provide sustained dollar supply, which aggrieved the rupee further, dealers said.

Traders expect the rupee to depreciate further to 45.75 to 46 levels during the next week on the back of month-end demand.

The bond market witnessed heavy selling pressure, which brought it down by 50 paise to one rupee across maturities on Friday.

The inflation figure at 5.55 per cent, which was 53 basis points up from the last figure, pulled the market southwards, dealers said.

The cut-off for the Rs 9,000 crore auction coming in lower than market expectations yesterday has also dampened the market sentiment along with the demand for the PF interest rate hike made by the Left parties.

The benchmark 10-year 7.37 per cent 2014 paper closed 85 paise lower than Thursday's close at Rs 114.20 with a 10 basis point drop in YTM to 5.48 per cent.

The 8.07 per cent 2017 paper had a one rupee drop to Rs 119.50 with yield rising to 5.86 per cent, up from Thursday's 5.75 per cent. The new 7.38 per cent 2015 paper closed lower at Rs 114.10 which was a Re 1 drop.

The call rates were between 4.25-4.50 per cent. In the LAF window, the RBI received and accepted 34 bids worth Rs 9,630 crore.