The Hindu Business Line : Rupee firms up; bonds erase losses

MUMBAI: The domestic currency held its ground at a five-month high on Wednesday assisted by export-related dollar sales and foreign investment inflows. The rupee closed at 45.04/06 against the dollar, marginally up from the previous close at 45.0750/0850.

The US currency weakened against other major currencies such as yen and euro through the day, adding to the bearish sentiment on the dollar, said a dealer at a private sector bank.

The rupee reached an intra-day high of 44.9850 in the afternoon deals, where several state-owned banks rushed in to make dollar purchases. "These banks were acting perhaps at the behest of RBI," said a dealer. The central bank intervention is possibly delaying fast appreciation of the home currency, he added.

Annualised premia on forwards fell as the six-month forward finished at 1.43 per cent (1.99 per cent) and the twelve-month at1.35 per cent (1.74 per cent).

Government securities erased losses as prices climbed on expectation that the next Government auction will be cancelled.

Surplus funds of the Government with the central bank rose to Rs 31,000 crore from Rs 20,500 crore. "The decision on the borrowing is yet to be taken," said Mr D. Swarup, Expenditure Secretary at the Ministry of Finance, and this led to improved sentiment.

Sliding oil prices across the globe, as the New York crude traded significantly lower at $45.80 per barrel also eased inflation worries. The cut-off yield at the Rs 500 crore 91-day Treasury bill auction was fixed at 5.62 per cent (cut-off price Rs 98.62).

The 7.38 per cent 2015 paper went to the lowest level of Rs 101.25, where its yield rose to 7.21 per cent, before closing at Rs 101.60 at YTM of 7.17 per cent. Another actively traded paper 7.55 per cent 2010 slid to Rs 102.65 before it ended firmer at Rs 103.00 at an YTM of 6.90 per cent.

Call rates in the inter-bank market remained tight, as most deals were done in the range of 6.00-6.25 per cent. RBI injected Rs 16,300 crore worth of funds in the system through 33 bids in the 1-day repo auction. The central bank received no bids in the 1-day reverse repo auction for the second consecutive day.

In the CBLO market 126 trades aggregating Rs 5,521.05 crore were transacted in the rate range of 5.97-6.15 per cent.