The Hindu Business Line : Rupee at 5-mth high; bond prices decline

MUMBAI: The rupee strengthened on the back of substantial FII inflows to a five-month closing at 45.20/21 against the dollar on Thursday. The rupee gained 17 paise over the previous day's close at 45.37/3750.

There was good two-way movement as foreign banks sold dollars heavily in the forex market, closely followed by exporters, dealers said. The rupee retraced its movement to 45.34 in the day as importers covered their positions.

Trades in the non-deliverable forwards (NDF) market towards the fag-end of trading hours coupled with weakening of the US dollar against other major currencies also helped the rupee rise, dealers said.

Following the rupee movement, annualised premia on dollar forwards moved up. The six-month forward closed at 3.00 per cent (2.75 per cent), while the one-year premia finished at 2.35 per cent (2.25 per cent).

Bond prices inched down nearly 20 paise as bearish sentiment continued ahead of the auction of Rs 8,000-crore worth of Government securities. Statements from the Finance Ministry that the Government would continue with the MSS auctions and other auctions as per the calendar brought the prices down, after they had risen marginally.

The 11-year benchmark 7.38 per cent 2015 paper closed at a yield of 6.95 per cent, lower by 20 paise to Rs 103.20. Another actively traded paper 6.65 per cent 2009 paper ended lower at Rs 100.93.

Call rates went as high as 6.00 per cent amid tight liquidity in the system after funds were drained out due to the State loan auction, dealers said. Under the LAF window the RBI received and accepted 3 bids in the 1-day reverse repo worth Rs 350 crore. In the 1-day repo auction, one bid was accepted worth Rs 75 crore at the rate of 6.00 per cent.

In the CBLO market, 126 trades worth Rs 4,380.30 crore were transacted in the rate range of 5.61-6.00 per cent.