Rupee closes over 46 as importers buy more $

MONEY MARKET ROUND-UP

The rupee weakened for a third day on speculation importers increased dollar purchases to settle month-end crude oil bills. The rupee slid 0.5 per cent to 46.205 a dollar at the 5 p.m. close in Mumbai. It reached 46.9750 last week, the lowest since July 2006.

The rupee approached a two-year low as refiners’ demand for the US currency climbed amid capital outflows from Asia’s third-biggest economy. The Indian currency’s 14.7 per cent slump this year makes it the second-worst performer among Asia’s 10 most-active currencies excluding the yen.

The bank borrowings from the Reserve Bank of India at Liquidity Adjustment Facility fell below Rs 50,000 crore, for the first time in the last 10 days, perhaps a sign of improvement in the liquidity conditions.

Banks running short of funds had borrowed as high as Rs 83,000 crore on Friday last week at repo window (LAF). The call rates also eased somewhat to rule between 8.5-12 per cent band compared a trend of rates shooting up beyond 16 per cent.

Bond: Late rise

The government bond prices ended almost 40 paise higher today because a section of the investors bought on hope the weekly inflation would be lower than estimate, dealers said. “The way bonds were bought towards the fag end of the trade shows some people were buying on hope inflation would be below estimates,” said a dealer with a large private bank.

The 10-year benchmark paper settled at Rs 97.87, or 8.5689 per cent yield to maturity, compared with Rs 97.50, or 8.6273 per cent on Wednesday. After market hours, government released inflation data for week ended September 13, which was unchanged at 12.14 per cent against market estimate of a rise to 12.23 per cent.

Despite the fact that inflation is way above RBI’s tolerance level of 7 per cent for the current financial year, no further monetary tightening is expected due to signs of moderation in domestic growth and downturn in global economy. This view is also continuing to support gilt prices.