Rupee climbs to 2-month high on strong shares

The rupee climbed to its highest levels in more than two months on the back of strong domestic shares that helped offset the impact of the euro’s loss against the dollar.

Traders expect the local unit to appreciate further in the short term. The partially convertible rupee closed at 44.83-84 per dollar, its highest level since January 4, and 0.3 per cent stronger than its previous close of 44.9550-9650.

“I think it may touch 44.70 tomorrow or day after. 44.90 was the technical level. Because that has been broken, it would comfortably come to 44.70,” said Sudarshana Bhat, head of forex at state-run Corporation Bank.

“There are lot of forward contracts which are maturing. If you look at the premiums, they have also gone up. So, probably that is a reason,” said Naveen Raghuvanshi, an associate vice president at Development Credit Bank.

The euro fell to a session low on Wednesday with some investors disappointed that the European Union would take more time to increase the size of the eurozone bailout fund. The euro per dollar was trading at around $1.4146 at the close of the local forex market. The common European unit had been around $1.4240 at end of local trade on yesterday.

The index of the dollar against six major currencies was up 0.19 per cent at 75.636 at the end of the local forex trade.

Bond yields fall l
Federal bond yields fell on Wednesday primarily on hopes the debt supply was unlikely to be heavy until the end of April, and amid possible buying by banks for year-end window dressing.

But, the fall in yields was limited by an underlying view that more monetary tightening by the Reserve Bank of India (RBI) was inevitable given the sticky inflation and high global crude oil prices. The yield on the most-traded 8.13 per cent, 2022 bond ended 3 bps lower at 8.08 per cent and the second-most traded 8.08 per cent, 2022 bond yield ended 2 bps lower at 8.10 per cent.

Intraday, the 8.13 percent, 2022 bond had moved in 8.08-8.11 per cent range. The relatively less traded benchmark 10-year bond yield ended steady at 8.01 per cent after easing earlier to 7.99 per cent.

The finance ministry and central bank officials will meet on Friday to finalise the government’s Rs 4.17 lakh crore gross market borrowing schedule for the first half of 2011-12.

In the overnight indexed swap market, the benchmark five year rate ended 1 bps lower at 8.02 per cent while the one-year rate rose 3 bps to 7.47 per cent.

Call rate eases
The call rate turned slightly weak on the overnight call money market on some excess liquidity in the banking system. The call rate fell back slightly to end at 7.70 per cent from 7.75 per cent yesterday. It moved in a wide range of 7.85 per cent and 6.80 per cent.

The Reserve Bank of India under the Liquidity Adjustment Facility purchased securities worth Rs 35,270 crore from 30 bids at the One-day repo auction at a fixed rate of 6.75 per cent.