Financial Daily from THE HINDU group of publications
Wednesday, Jul 28, 2004

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Rupee volatile; bonds decline

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MUMBAI: The rupee moved two-way against the dollar on Tuesday. It closed at 46.21/22, stronger by six paise from Monday's close of 46.27/28.

The trading sessions in the morning saw a lot of demand for dollars with State-run banks also mopping up greenbacks until afternoon, said a senior dealer with a foreign bank. Heavy infusion of the US currency by a large corporate and some public sector units along with some foreign banks pushed the rupee to a high of 46.15, he added.

The forwards premia inched up, with the six-month closing at 2.39 per cent (2.37 per cent) and the twelve-month ended at 1.95 per cent (1.89 per cent).

Bond yields inched up as investors limited purchases ahead of the State Government debt sale worth Rs 8,600 crore due on Wednesday, said dealers. Prices across maturities fell by about 25 paise in a depressed market, they added.

"The market participants seem to have lost confidence in the g-secs, therefore heavy selling pressure was encountered with an absolute lack of trading," said a primary dealer. The yield to maturity on the ten year benchmark 7.37 per cent 2014 moved higher to close at 5.94 per cent as against previous day's closing of 5.92 per cent.

"Inflation continues to be a major worry for the bond market with a hike in domestic oil prices expected by the end of the week. The statement from a finance ministry official stating the Government did not expect inflation to move higher did little to improve the sentiment," said a dealer with a Primary dealer.

Call rates in the inter-bank market were in the range of 4.00-4.25 per cent. Under the LAF window the RBI received and accepted 48 bids worth Rs 15,030 crore.

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