The rupee strengthened on speculation that foreign investors’ purchases of local corporate debt would boost demand for the currency. The Securities & Exchange Board of India auctioned $5 billion of corporate bond-purchase quotas on November 30 to foreigners, who must use their allocations by a February 28 government deadline or let these expire.
The rupee advanced 0.2 per cent to 49.23 per dollar in Mumbai, taking gains for the month to 0.5 per cent, according to data compiled by Bloomberg. The currency has appreciated 7.8 per cent this year — Asia’s best performance. Foreign funds pay a fee for the right to buy rupee- denominated government and corporate bonds. India’s market regulator conducts the auctions with no fixed schedule, and the quota system is designed to discourage speculative capital.
Government securities (G-Secs) dropped on Wednesday on selling by banks and companies. The 8.79 per cent G-Sec maturing in 2021 fell to Rs 103.73 from Rs 104.06 yesterday, while its yield shot up to 8.22 per cent from 8.17 per cent. The 9.15 per cent G-Sec maturing in 2024 per cent slipped further to Rs 106.4025 from Rs 106.69.
Call rate down
The call rate tumbled at the overnight call money market on Wednesday on surfeit liquidity in the system, closing at 8.50 per cent, compared with 8.85 per cent yesterday.
The union budget for 2013-14 is likely to be negative for the Indian rupee, at least in the short-term, according to investment bank Goldman Sachs.