The Hindu Business Line : Rupee moves up; bond prices fall

MUMBAI: The rupee gained sharply against the US dollar on Monday due to good supplies, possibly from the ICICI Bank's public issue and inflows into the equity market. Dealers said tightness in the call money market forced banks to liquidate their long-term dollar positions, which also helped the rupee to appreciate.

The rupee opened at 45.33 and ended at 45.03 at a two-month high, 31 paise up from Friday's close of 45.34. It is difficult to predict the course of the rupee, said the chief forex dealer of a private bank. "The rupee has lost sharply against the dollar in the last few weeks and gained at almost the same speed. It is difficult to say how it will move now," he said.

The forward premia were also sharply higher with the six-month closing at 1.3 per cent (1.1 per cent) and the one-year at 0.95 per cent (0.82 per cent).

In the bond market, prices fell slightly due to the crunch in liquidity.

Dealers said the current tightness in liquidity was a concern and maintaining the Cash Reserve Ratio (CRR) was becoming a problem for banks.

"With nationalised banks also turning borrowers, the situation in the bond market could only turn worse. The prices might turn upwards only in January post-the IMD redemption and the advance tax outflows this month," said a dealer at a private bank.

The 8.07-12 year-2017 paper opened at Rs 106.40 (7.22 per cent YTM) and ended at Rs 106.34 (7.227 per cent YTM), down from Friday's close at Rs 106.40 (7.21 per cent YTM). The 10.25-16 year-2021 paper opened at Rs 126.17 (7.38 per cent YTM) and closed at Rs126.08 (7.39 per cent YTM), lower than Friday's Rs 126.12 (7.38 per cent).

The call rate closed at 6.25-30 per cent and deals were done even at 7 per cent (6.25-6.40). In the first one-day reverse repo auction, the RBI received and accepted two bids amounting to Rs 225 crore and nine bids for Rs 5,240 crore in the repo auction. In the second one-day reverse repo auction, RBI received one bid for Rs 300 crore and three bids for Rs 220 crore in the repo auction.

In the CBLO market, there were 325 trades for Rs 15,232.35 crore in the range of 5.91-6.30 per cent.