Rupee declines to 2-week low

MARKET ROUND-UP

The rupee on Monday lost 20 paise to close at a fresh two-week low of 53.30/31, ending the first day of trading in the new year on a subdued note.

Foreign exchange dealers said sustained dollar demand from importers weighed against the rupee sentiment. The currency moved between 53.12 and 53.40 at the interbank foreign exchange market before closing at 53.30/31, down 20 paise over the previous close. Meanwhile, the Bombay Stock Exchange Sensex ended 63 points higher at 15.517.92. Dealers said increased demand for the dollar from importers and concerns over the government’s widening fiscal deficit weighed on the sentiment.

In 2011, the rupee crashed by Rs 8.4, or 18.79 per cent. “The rupee ended weak on Monday on demand for dollars from importers. In global markets where dollar traded lower against the major currencies. Local equities also traded range bound and closed in green,” said Alpari Financial Services (India) chief executive, Pramit Brahmbhatt.

Bond yields drop
Ten-year bond yields fell the most in almost 20 months, amid speculation that the central bank would accelerate debt purchases to boost cash at banks after the government increased its borrowing target to a record.

The Reserve Bank of India resumed open-market purchases of sovereign securities in November and has purchased Rs 41,200 crore of notes through auctions since then, official data show. Yields at the highest level in almost a month also attracted buyers, said Killol Pandya, head of fixed-income investment at Daiwa Asset Management (India) Pvt. “Expectation is building up that the central bank may take some measures to boost cash to support the borrowing programme,” Pandya said. The yield on the 8.79 per cent notes due November 2021 fell 19 basis points to 8.39 per cent in Mumbai, according to the central bank’s trading system, the biggest drop in benchmark yields since May 2010.

Call rate stable
The call rate improved at the overnight call money market on Monday due to lack of liquidity in the banking system. The rate settled at nine per cent, compared with 8.85 per cent on Friday. It moved in a range of 9.05 per cent and 8.75 per cent.