The Hindu Business Line : Rupee sheds 36 paise; gilts range-bound

MUMBAI: The rupee eroded gains for the second consecutive session as it ended at 44.07/08 against the dollar, 36 paise weaker than Tuesday's close at 43.71/73.

Recovery of the US currency globally in addition to corporate demand for dollars led the domestic currency to weaken to its intra-day low at 44.1850 early in the day, dealers said.

"This recovery of the dollar against euro and yen which went through volatile movements, is only a correction for the currencies, and is not expected to sustain," said a dealer at a foreign bank. This means that the dip in the rupee on account of easing of the dollar is likely to be short-lived, he added.

Cancellation of non-deliverable forward contracts, in addition to heavy buying of greenbacks by importers also was behind the rupee's steady fall today, dealers said.

Some trade-related greenback selling helped the home currency's recovery at close.

Meanwhile, the annualised premia on forwards moved higher as the six month forward closed at 1.62 per cent (1.55 per cent) while the twelve-month forward closed at 1.22 per cent (1.10 per cent).

In the domestic Government securities market, prices closed about 15 to 20 paise higher than previous levels, after a range-bound movement.

"Due to easy liquidity conditions, and oil prices near a 44-month low, bond prices traded in a narrow band of 10 paise," said a dealer at a State-owned bank.

The benchmark 7.38 per cent 2015 paper ended at an yield of 6.71 per cent, lower than previous closing yield of 6.75 per cent.

The 7.55 per cent 2010 paper closed at 6.44 per cent, 3 basis point lower than the previous ending yield of 6.47 per cent.

At the Rs 2,000 crore 364-day treasury bill auction, the cut-off yield was set at 5.65 per cent (5.65 per cent). At the Rs 2,000-crore 91-day treasury bill auction, the cut-off yield was set at 5.15 per cent (5.15 per cent).

"As the cut-off yields came at near market expectations, it did not have an effect on the bond prices," said a dealer.

Call rates in the inter-bank market were in a range of 4.60-4.80 per cent. Under the LAF window, RBI accepted all 44 bids worth Rs 17,840 crore in the one-day reverse repo auction.

In the CBLO market, 118 trades worth Rs 4,781.55 crore were transacted in the rate range of 4.50-4.80 per cent.