Re falls 41 paise; Street sees more weakening

The rupee fell its most in one-and-a-half months, as global risk aversion pushed domestic stock markets lower. The Street expects it to weaken further and touch Rs 55 a dollar soon, amid month-end demand.

The currency awaits cues from the Budget next week. It closed 54.47, 41 paise lower against the previous close of 54.48 a dollar. “The fall was primarily due to bearish domestic equity market sentiments,” said Akhil Thomas, assistant manager (forex), Federal Bank.

Global risk assets were pummelled as world share markets fell and the dollar and safe-haven assets rose, a day after minutes of the Federal Reserve’s last policy meeting cast doubts over how much longer the US central bank would stick to its stimulus plan. The sell-off was reflected in domestic markets, as shares fell their most in nearly seven months, raising concerns about whether there will be continued inflows into equities that have largely buoyed the rupee so far.

According to Sandeep Gonsalves, forex consultant and dealer, Mecklai & Mecklai, the fall in rupee was also due to supply constraint as public sector bank employees continued their strike.

The rupee had opened at 54.37 against the dollar. During the day, it had touched a high of 54.30 and had weakened to 54.63 a dollar. Month-end importers’ demand also kept the rupee under pressure against the greenback, said dealers.

“Month end oil purchases coupled with gold imports will weaken the rupee further,” said Thomas.

Bonds react downward
Government bonds reacted downwards on selling pressure from banks and companies.

The 8.33 per cent government security maturing in 2026 dropped to Rs 103.53 from Rs 103.64 yesterday, while its yield edged up to 7.90 per cent from 7.88 per cent. The 8.15 per cent government security maturing in 2022 dipped to Rs 102.19 from Rs 102.24, while its yield inched up to 7.81 per cent from 7.80 per cent.

The 8.19 per cent government security maturing in 2020, the 8.12 per cent government security maturing in 2020 and the 8.97 per cent government security maturing in 2030 were also quoted lower at Rs 101.47, Rs 101.60 and Rs 108.70, respectively.

Call rates end higher
Overnight call money rates ended higher here on Thursday on good demand from borrowing banks. The rate finished higher at eight per cent from 7.95 per cent previously, it moved in a range of eight per cent and 7.75 per cent.