The Hindu Business Line : Rupee falls sharply

The strengthening of US currency in the overseas markets and exporters buying dollars in the domestic market were factors that led to the rupee's slide. The rupee ended 14 paise lower than its previous close at 44.07/08.

"Banks and corporates bought dollars to cover for short dollar positions taken earlier. This helped increase the demand for the US currency," said a dealer at a foreign bank. Taking short dollar positions means selling dollars in advance without actually holding them.

"As the rupee's appreciation is slowing, FIIs are also not moving in a hurry to invest larger amounts," said a dealer.

The future movement of the rupee will also depend on the dynamics of international currency majors against the US dollar primarily euro, said another dealer.

Annualised forward premia softened as the six month forward closed at 1.45 per cent (1.62 per cent) while the twelve-month finished at 1.12 per cent (1.22 per cent).

Bonds rise: Continuing the trend of steady rise in prices for the past few days, bond prices went up by nearly 10 paise, dealers said.

Slight buying interest was witnessed on back of improved sentiment, as liquidity conditions remained easy after smooth passage of the state development loan and Treasury bill auctions. Likelihood of oil prices to be reduced in India after oil prices have tumbled globally and fall in US bond yields also triggered buying interest, dealers said.

The benchmark 7.38 per cent 2015 paper closed at an yield of 6.70 per cent, one basis point lower than previous yield of 6.71 per cent. The paper closed at a price of Rs 105.06, after rising to Rs 105.15 during the day. Actively traded 7.55 per cent 2010 paper finished at 6.42 per cent, two basis points lower than previous closing level. The paper had moved as high as Rs 105.12 before it ended at Rs 105.08.

Meanwhile, call rates were in the range of 4.50-4.75 per cent. Under the LAF window, RBI accepted all 50 bids worth Rs 20,720 crore. In the CBLO market, 121 trades worth Rs 4,264.50 crore were transacted in the rate range of 4.50-4.80 per cent.