The Hindu Business Line : Rupee falls to below 46; bonds gain

Mumbai, Sept. 15 As news of Lehman Brothers’ filing for bankruptcy sent the stock markets into a churn, the rupee breached the 46- level against the dollar on Monday, for the first time in two years. Widening arbitrage in the overseas non-deliverable forwards (NDF) market and weakening of other major currencies such as the euro and the pound against the dollar dragged down the rupee sharply.

“About 80 per cent weightage can be attributed to arbitrage in the overseas market as the reason for the rupee’s fall,” said Mr Paresh Nayar, Chief Forex Dealer, Development Credit Bank .

The NDF market is an unofficial international market for trade in currencies. Banks that have foreign exchange operations in international markets such as Hong Kong and Singapore buy dollars in the spot market and sell in the NDF market at higher rates. The advantage is about 15-25 paise, said a forex dealer with a state run bank.

The rupee fell by 30 paise and closed above 46, a level last seen in September 2006.

The rupee opened at 45.52/54, but soon fell to the day’s low of 46.08. It closed at 46.04/05 against Friday’s close of 45.74.

Bond prices gain

Bond prices went up by Rs 1.34 on talks of possible rate cuts by foreign central banks, especially by US Federal Reserve after the collapse of two major banks, said bond dealers.

Besides, after China cut its CRR and lending rates, and with the European Central Bank also likely to cut rates, the general expectation is that the RBI too may follow suit, said dealers.

In the G-Sec market, the total traded volumes on the order matching system were substantially higher at Rs 11,515 crore (Rs 7,420 crore).

The 8.24 per cent-10 year-2018 paper opened at Rs 99.5 (8.31 per cent YTM) and touched an intra-day high of Rs 100.69 (8.13 per cent YTM). It closed at Rs 100.55 (8.15 per cent YTM), against the previous close of Rs 99.21 (8.35 per cent YTM).