Concerns of oil refiners' dollar buys bring rupee down

The rupee weakened, snapping a five-day rally, on speculation the nation’s oil refiners stepped up dollar purchases to pay for costlier crude imports.

Oil touched a 30-month high of $109.15 a barrel on Wednesday in New York, according to data compiled by Bloomberg. India imports almost 75 per cent of the crude it uses. Concern that political disagreements in Washington over budget cuts would lead to a partial government shutdown and hamper global economic recovery also weighed on the rupee, said Vikas Babu, a foreign- exchange trader at state-owned Andhra Bank.

“Importers, including oil companies, are in the market buying dollars,” Babu said. “The rupee’s weakness also tracks the offshore forwards market, which seems to be driven by concern about the threat of a US government shutdown.”

The rupee declined 0.1 per cent to 44.205 per dollar at close in Mumbai, according to data compiled by Bloomberg. The currency touched 44.14 yesterday, its strongest level since October 15.

Offshore forwards indicate the rupee will trade at 44.85 in three months, unchanged from Wednesday’s expectations. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars.

Call rate drops
Call rates dropped further to close at 5.85 per cent at the overnight call money market here on Thursday in view of ample liquidity available in banking system.

The overnight call money rate finished lower at 5.85 per cent from Wednesday’s closing level of 6.05 per cent. It moved in a range of 6.05 per cent and 5.25 per cent.

Bonds see little change
Eleven-year bonds were little changed ahead of the government’s first debt sale in almost two months on Friday.

The finance ministry will auction $2.7 billion of securities maturing in seven, 10 and 29 years. The last debt sale was on February 11. The auctions are part of the finance ministry’s Rs 4.17-lakh crore borrowing plan for the financial year 2011-12.

“The 10-year bond should be well bid as securities of that maturity are usually the most liquid,” said AY Shedshale, a Mumbai-based deputy general manager at Bank of Maharashtra. “Investors will be making some room for fresh issuance.”

The yield on the 8.08 per ent note due August 2022 stood at 8.06 per cent as of 10:05 am in Mumbai, according to the central bank’s trading system.

The cost of one-year interest-rate swaps, or derivative contracts used to guard against fluctuations in borrowing costs, rose two basis points to 7.49 per cent. A basis point is 0.01 percentage point.