The Hindu Business Line : Rupee stronger; gilts decline

MUMBAI: The rupee closed on Monday at its strongest levels, in over a month at 46.17 against the dollar in the first day of trading, post-hike in the cash reserve ratio by the Reserve Bank of India.

The domestic currency strengthened on aggressive dollar selling by exporters after opening at 46.24/25, dealers said.

"The increase in CRR will ensure that the rupee liquidity in the system will be constrained to some extent. Therefore, we may not see aggressive mopping up of dollars in the market in the near future. The outlook for the rupee is that it will appreciate in the near to medium term," said a dealer with a private sector bank.

In the forwards market, the premia eased in tandem with the appreciation in the rupee. The six-month premium ended at 1.72 per cent (1.81 per cent), while 1.55 per cent (1.56 per cent).

In the bond markets, prices fell by 30-50 paise across maturities on a net basis as compared to Friday's levels.

In early trades, the 7.37 per cent 2014 opened at Rs 109.80 and fell to a low of Rs 108.35 before it inched back up to Rs 109.60. The ten-year yield hardened to 6.21 per cent before settling at 6.09 per cent.

"Bond markets crashed on poor sentiment following the CRR hike, but recovered once it became clear that interest rates may not harden immediately," said a dealer.

Meanwhile, under the liquidity adjustment facility, in the seven-day repo, the RBI received and accepted 13 bids amounting to Rs 5,135 crore at the rate of 4.50 per cent. In the one-day repo, it and accepted received 44 bids amounting to Rs 21,230 crore at the rate 4.50 per cent.

In the CBLO market, 113 trades amounting to Rs 3,998.90 crore were conducted in the rate range of 4.25 per cent and 4.50 per cent.