Financial Daily from THE HINDU group of publications
Friday, Jul 23, 2004

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Money & Banking - Forex

Rupee sheds 13 paise; gilts fall

Our Bureau

MUMBAI: The rupee closed at 46.26/27 against the dollar on Thursday, weaker by 13 paise from Wednesday's close of 46.13/14. The domestic currency weakened substantially during the day's trade, but regained its loss to an extent.

Corporate demand drove the rupee to 46.20 levels in the early trading hours, said dealers. A petrochemical major bought dollars along with other oil companies, they added.

The market witnessed a demand-supply mismatch, with demand far outstripping supply, bankers said. The forwards were lacklustre in the early trade but later firmed up. The six-month forward closed at 2.05 per cent (1.96 per cent) and the twelve-month forward ended at 1.72 per cent (1.75 pc).

Bond prices fell by nearly 40 paise across maturities on announcement of sale of State Government loans on July 28 worth Rs 8,600 crore and inflation concerns, said dealers. This coupled with underlying bearish sentiment on the market also had a bearing on rising yields, they added.

Yield to maturity on the 10-year benchmark rose by over 10 basis points to close at 5.96 per cent after opening at 5.84 per cent. "The market has reacted negatively on concerns over the inflation number expected at 6.50 per cent. Additional concern is on account of the below normal monsoon," said a senior dealer with a private sector bank.

Call rates were easy at 4.00-4.25 per cent with bankers encountering no liquidity problems. Under the LAF window, RBI received and accepted 43 bids worth Rs 7,275 crore.

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