In a thin trade, the rupee on Wednesday rose by four paise to close at more than a one-week high of 44.45/46 against the US currency, following a weak dollar abroad and fresh capital inflows, despite weak local equities.
At the forex market, the local unit opened better at 44.45/46 a dollar. It settled the day at 44.45/46. Yesterday, the rupee had ended the day eight paise higher. Forex dealers said weakness in the American currency in global markets amid fresh inflow of funds by foreign institutional investors in the domestic equity markets aided the rupee sentiment. Sustained dollar selling by exporters also helped the rupee rally, they added.
India Forex Advisors chief executive Abhishek Goenka said,”The rupee traded in very narrow range on Wednesday and ended at 44.45. All Asian currencies were stronger this afternoon.” Alpari Financial Services (India) chief executive Pramit Brahmbhatt said, “The Euro rose in the later part of trade with investors hopeful that European leaders will reach some kind of deal to ease the debt problems in Greece at the summit tomorrow. Local equities ended weak.”
India’s 10-year bonds dropped for a second day on speculation that investors would refrain from adding to their holdings before a $2.7-billion debt sale this week.
The auction is part of the government’s plan to raise Rs 4.17 lakh crore selling notes for the financial year ending March 31. India has no intention to change its borrowing plan, R. Gopalan, secretary of the economic affairs department at the finance ministry, said on Wednesday.
“The huge debt supplies and inflation are big negatives for bonds,’ said J Moses Harding, a Mumbai-based executive vice-president at IndusInd Bank Ltd.
The yield on the 7.8 per cent government notes due April 2021 rose two basis points to 8.28 percent at the close in Mumbai, according to central bank data. The price fell 0.14, or 14 paise per 100 rupee face amount, to 96.81.
The government would sell notes due in 2017, 2022 and 2027 on July 22. The central bank may increase the repurchase rate by 25 basis points to 7.75 percent at its next policy review on July 26, Harding said.
The cost of one-year interest-rate swaps, or derivative contracts used to guard against fluctuations in borrowing costs, rose one basis point, or 0.01 percentage point, to 7.91 per cent.
CALL RATE STEADY
The call rate ended stable on the overnight call money market on Wednesday on alternate bouts of demand and supply. The overnight call rate settled the day at its previous closing level of 7.60 per cent. It moved in a range of 7.70 per cent and 7.45 per cent.