Re declines to week's low on global woes

The rupee fell to a one-week low today as tumbling commodity prices hit global risk currencies but pared losses after lower-than-expected inflation data raised hopes the Reserve Bank of India would cut interest rates next month.

The partially convertible rupee closed at 54.6250/6350 a dollar, 0.2 per cent weaker than its close of 54.52/53 on Friday. The rupee dropped to as low as 54.7950 in early trade, its weakest since April 8.

Rate cuts could support the rupee by shoring confidence in economic growth and sparking potential gains in equity markets. In the offshore non-deliverable forwards, the one-month contract was at 54.90 while three-month was at 55.52.

Bonds follow the currency
The country's 10-year bond yield dropped to one-and-a-half month lows, while near-end swap rates slid to two-year lows after lower-than-expected core wholesale inflation data cemented expectations that the central bank would cut interest rates in its May 3 policy review.

Prospects of RBI relief could help support bonds after the 10-year yield hit a yearly high of eight per cent early this month, as India registered a record current account deficit in the October-December quarter.

The 10-year bond yield fell 4 basis points (bps) from Friday's close to 7.83 per cent. The yield had earlier slid to a session low of 7.8150 per cent, a level last seen on February 28.

Call rates end higher
Call money rates finished higher at the overnight market here today, due to good demand from borrowing banks.

The overnight call money rate finished higher at 7.55 per cent from 7.10 per cent previously. It moved in a range of 7.65 per cent and 7.25 per cent.