The Hindu Business Line : Rupee strengthens; securities recover

MUMBAI: The rupee strengthened for the second day in a row to close at 46.30/31 per dollar on Wednesday on ample supplies of greenbacks. The rupee was up five paise from previous day's close of 46.35/36.

In the early deals, the rupee was weak as as the US currency had gained substantially overseas after a 25 basis point hike by Fed. Speculative buying of dollars was witnessed in early deals which led the rupee to day's low of 46.43, dealers said. Towards the later part of the day substantial selling of greenback was observed in the market on account of FII inflows and perhaps foreign inflows for the TCS IPO issue, said dealers. There was also heavy infusion of dollars by State-run banks perhaps at the behest of RBI. Foreign banks also sold dollars, they said.

The forward premia rose as the six-month ended at 2.80 per cent (2.53 per cent) and the twelve-month premium closed at 2.45 per cent (2.28 per cent).

Call rates tightened substantially to the extent of 5.50 per cent. Most deals were above 4.75 per cent, dealers said. There seems to be a pressure on liquidity as SBI was borrowing heavily, with LIC and Mutual Funds also borrowing funds, they said. Bond prices crashed by over a rupee in the morning in medium term papers only to recover towards end of the day following RBI Governor's statement that inflation would be closely monitored.

The 10-year benchmark 7.37 per cent 2014 paper eased to close at an yield of 6.55 per cent, off from early highs of 6.67 per cent. The 11-year benchmark 7.38 per cent 2015 paper closed up about 80 paise at Rs 105.90.

Meanwhile, under the LAF window, the RBI received and accepted 14 bids worth Rs 2,210 crore.