The Hindu Business Line : Rupee firms up; gilts fall further

MUMBAI: The rupee strengthened on Wednesday due to substantial FII inflows, after witnessing a 10 paise movement intra-day. The rupee ended at 45.6300/6400 against the dollar, up from the previous close at 45.6850/6900.

Although the rupee depreciated to 45.75 in the early morning trades on back of demand for dollars from oil importers, it moved up later, dealers said. Recovery was seen from mid-afternoon onwards when foreign banks stepped in to sell dollars on behalf of foreign investors. Forward premia inched up as the six-month forward closed at 2.83 per cent (2.77 per cent) while the 12-month premia ended at 2.34 per cent (2.25 per cent).

Bond prices continued their downslide as a further fall of 50 paise was seen across maturities. Some recovery in prices was witnessed during the later half of the day, as the auction cut-off on treasury bills came in line with market expectations.

The 10-year benchmark 7.37 per cent 2014 paper closed at a yield of 6.86 per cent after it had risen to 6.92 per cent intra-day. The 11-year benchmark 7.38 per cent 2015 paper closed at Rs 103.60 at a yield of 6.90 per cent.

Bond market participants are expecting another repo rate hike of 25 basis points, by the end of this calendar year or the beginning of the next year. Sentiment continues to be subdued in the bond market as further fall in prices is expected.

Call rates in the inter-bank market were in the range of 4.50-5.00 per cent. Under the LAF window, RBI mopped up Rs 8,515 crore through 22 bids in the one-day repo, while it absorbed Rs 25 crore by a sole bid in the 7-day repo. In the CBLO market, 150 trades worth Rs 5,453.25 crore were transacted in 3.10-5.00 per cent range.