The Hindu Business Line : Rupee sharply down; yields rise

MUMBAI: Higher oil prices, which stepped up dollar purchases by oil companies, drove the rupee down as it closed at 46.1050/1150 against the dollar, the level not seen for nearly a month, traders said. On Monday the Indian currency had ended at 45.9550/9650 per dollar.

According to dealers, a steady decline in the domestic currency was on account of heavy demand for greenbacks for month end payments as well as for covering short positions. "The central bank was intermittently in the market, but did not support the rupee throughout," said a dealer with a foreign bank. The forwards moved higher with export cancellations seen. The six-month forward closed at 2.30 per cent (1.98 per cent) while the twelve-month forward closed at 1.90 per cent (1.65 per cent).

Expectation of higher inflation as oil prices surged to $50 per barrel drove bond prices southward, dealers said. Prices fell as traders offloaded positions with profit booking by banks ahead of half yearly valuations. Expected announcement of a MSS calendar also dampened sentiment, they said.

Prices fell by almost a rupee in the longer tenor papers while in the mid term segment the dip was about 60 paise. The 10 year benchmark 7.37 per cent 2014 paper closed at Rs 108.35 at an yield of 6.19 per cent, 7 basis points higher than previous close of 6.12 per cent. The 11-year benchmark 7.38 per cent 2015 paper fell to end at Rs 108.95 and its yield rose to 6.24 per cent against previous close of 6.16 per cent.

Call rates were in the range of 4.50-4.60 per cent. Meanwhile, under LAF RBI accepted all 30 bids in the one day repo worth Rs 13,135 crore and mopped up 7 bids in the 7 day repo worth Rs 1,525 crore.

In the CBLO market 100 trades worth Rs 2,392.55 crore were transacted in the rate range of 4.35-4.70 per cent.