The Hindu Business Line : Call rates surge; rupee weakens

MUMBAI: The call rates soared to 8.25 per cent during the day on account of tight liquidity in the system on Friday. Banks also borrowed Rs 33,000 crore from the Reserve Bank of India through the repo window.

Dealers said the Government's expenditure has not yet entered the system causing pressure on liquidity. A dealer at a private bank said the Government seemed to be containing expenditure to keep a control on deficit. "If the RBI intervenes to prevent the appreciation of the domestic currency and infuse rupee in the system, then the liquidity in the system could see improvement," said the dealer.

The call rate closed at 6.75-7 per cent (7-7.25). In the first three-day reverse-repo, the RBI received one bid for Rs 25 crore and 39 bids for Rs 26,135 crore in the repo auction. In the second three-day reverse-repo auction, RBI received four bids for Rs 690 crore and 18 bids for Rs 7,155 crore in the repo auction.

In the bond market, prices fell due to the crunch in the liquidity and higher call rates.

The announcement of a State loan auction next week would cause a further outflow from the system, said a dealer.

In the CBLO market, there were 291 trades for Rs 11,313.5 crore in the rate range of 6.05-6.40 per cent (6.25-6.5 per cent).

The 8.07 per cent-11 year-2017 paper opened at Rs 106.60 (7.19 per cent YTM) and closed at Rs 106.495 (7.20 per cent YTM).

The 9.39 per cent - 5 year-2011 paper opened at Rs 112.17 (6.69 per cent YTM) and closed at Rs 112.12 (6.70 per cent YTM), down from Thursday's close at Rs 112.20 (6.69 YTM).

The rupee declined against the dollar tracking the fall in other major currencies.

The currency opened at 44.28/30 and touched an intra-day low of 44.31/32. It closed the day at 44.24, down from Thursday's close at 44.1350/14.

Dealers said the rupee fell in tandem with the overnight drop in other currencies. The yen depreciated to 114.50 yen. The higher call rates also caused some pressure on the rupee because it was expensive to purchase the rupee, said dealers.

In the forward premia market, the 12-month closed at 1.37 per cent (1.48 per cent) and the six-month at 1.86 per cent (2.3 per cent).