Rupee declines for seventh day

The rupee weakened for the seventh day, the longest losing streak since March 2009, on speculation that local refiners stepped up dollar purchases to settle pending Iranian oil bills.

Companies, including Indian Oil Corp, started making such payments this month after the nations resolved an impasse over banks’ inability to transfer the funds due to international sanctions against the country. The cost to swap rupees for dollars in a month in the local forward market fell to the lowest level since 2008, as buyers of the greenback in the spot market sold derivative contracts to cut exchange-rate risk, according to Vikas Babu, a trader at Andhra Bank.

“The Iran payments have taken dollars out of the system,” Mumbai-based Babu said. “Importers are buying dollars after the rupee rose earlier today. There is a lot of panic in the forwards segment and this is reflecting in the spot market.”

The rupee declined 0.1 per cent to 45.2550 per dollar at the close in Mumbai, according to data compiled by Bloomberg. The annualised cost of one-month dollar-rupee forward contracts fell 2.59 percentage points to 1.31 per cent, the lowest level since October 2008.

Iran received $1.4 billion of the $4.8 billion owed by Indian oil companies, the Persian Gulf nation’s state-run Fars news agency reported on August 8.

BONDS FIRM
Government bond prices continued to rule firm on persistent buying support from banks and companies.

The 7.80 per cent government security maturing in 2021 firmed up further to Rs 97.40 from Rs 97.17 yesterday, while its yield declined to 8.19 per cent from 8.23 per cent. The 8.13 per cent government security maturing in 2022 shot up to Rs 98.70 from Rs 98.46, while its yield moved down to 8.31 per cent from 8.34 per cent.

The 8.08 per cent government security maturing in 2022 hardened to Rs 98.40 from Rs 98.20, while its yield fell to 8.30 per cent from 8.33 per cent. The 7.83 per cent government security maturing in 2018, the 7.59 per cent government security maturing in 2016, the 8.28 per cent government security maturing in 2027 and the 8.07 per cent government security maturing in 2017 were also finished higher at Rs 97.99, Rs 97.60, Rs 97.90 and Rs 99.40, respectively.

The Reserve Bank of India, under the Liquidity Adjustment Facility, purchased securities worth Rs 54,315 crore from 29 bids at one-day repo auction at a fixed rate of 8.00 per cent and also sold securities worth Rs 485 crore from three bids at one-day reverse repo auction at a fixed rate of 7.00 per cent.

CALL RATE RECOVERS
The call rate ended stable on the overnight call money market today on alternate bouts of demand supply. The overnight call money rate ended settled the day at its previous closing level of 8.00 per cent. It moved in a range of 8.10 per cent and 7.90 per cent.