The Hindu Business Line : Rupee under pressure; bond prices weaken

MUMBAI: The rupee continued to be under pressure on Tuesday as the month-end demand for the US dollar continued from oil companies and other importers. It opened at 43.96/97 and closed at 44.04/05, lower than Monday's level of 43.96.

There were not many trades at the 44.05 closing level, which was last seen on August 30 and 31.

A dealer with a public sector bank said there was selling by exporters above the 44-level. However, demand outstripped supply, causing the rupee to weaken.

The forward premia closed lower with the 6-month premium closing at 0.65 per cent (0.85 per cent) and the 12-month premium also closing at 0.65 per cent (0.76 per cent).

The bond market too was weak with prices falling by about 25-30 paise. The reasons for the decline included rise in US yields, which touched 4.32 per cent, rising crude prices and lack of buying support.

Traders are also expecting a 25 basis point hike in the reverse repo rate in October. Sentiments were bearish due to this, said a dealer with a private bank.

Volumes were thin and only two papers were active. The 7.37 -9 year - 2014 opened at Rs 102.36 (7 per cent YTM) and closed at Rs 102.17 (7.03 per cent YTM), lower than Monday's close of Rs 102.43 (6.99 per cent YTM). The 10.25 - 16 year-2021 paper opened at Rs 125.89 (7.43 per cent YTM) and ended trade at Rs 125.56 (7.46 per cent YTM), against the previous close of Rs 126 (7.42 per cent YTM).

Liquidity was another reason for worry, said the dealer. "Though liquidity has improved drastically, it is not abundant," he said.

Call rates were at 5-5.10 per cent (5-5.10 per cent). In the one-day reverse repo auction, the Reserve Bank of India received and accepted 41 bids amounting to Rs 22,880 crore. In the CBLO market, there were 216 trades for Rs 9,971.20 crore in the rate range of 4-5.25 per cent.

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