The Hindu Business Line : Rupee gains 34 paise; bond prices up

BUOYED by strong dollar inflows and a easing in global crude oil prices, the domestic financial markets were on an upswing on Thursday with the rupee appreciating by 34 paise and bond prices rallying by around Rs 1.50 in the debt markets.

The Indian currency appreciated for the sixth consecutive session as foreign funds continued to pump in dollars in the equity markets. Rupee closed at 44.11/12 per dollar, against its previous close at 44.45/46. The rupee touched an intra-day high of 44.05.

"News of the FII investment limit in corporate bonds being capped at $500 million, in addition to the slide of the dollar against the euro during the day, triggered a bout of dollar buying," said a trader at a public sector bank.

This led the home currency to an intra-day low of 44.36, after which it recovered on strong dollar inflows.

Meanwhile, forward premia rose as the six-month annualised premium ended at 1.07 per cent (1.00 per cent) while the twelve-month forward closed at 0.84 per cent (0.81 per cent).

Bond prices rallied following an easing in global crude oil prices.

However, profit booking by traders on the news of the $500-million cap on FII investment in corporate debt led to a fall in prices, but other positive factors, like expectation of lower government borrowings, improving liquidity conditions and softening yields in US treasuries helped the gilts stage a recovery.

The yield on the benchmark 7.38 per cent 2015 paper fell to 6.69 per cent intra-day from where it rose to 6.87 per cent before ending at 6.80 per cent.

In the one day reverse repo RBI accepted all 28 bids worth Rs 7,975 crore.

Inter-bank call rates were in the range of 4.50-4.80 per cent.