Rupee dips, snaps 2-day advance

The rupee declined, snapping a two-day advance, on speculation that global funds are reducing holdings of the nation’s shares, as Asia’s third-biggest economy slows.

The currency has slid 3.9 per cent this month as international investors sold $1.8 billion more local shares than they bought through Monday, according to exchange data. The $1.7-trillion economy grew 7.6 per cent in the three months ended June, the least in six quarters, according to the median forecast of economists before official data due on August 30.

Outflows of funds from stocks “is playing a part in the weakness of the currency,” said Naveen Raghuvanshi, a Mumbai- based currency trader at Development Credit Bank Ltd.

The rupee dropped 0.8 per cent to 45.9825 per dollar at the close in Mumbai, according to data compiled by Bloomberg. That was the weakest closing level since September 2010.

Offshore forwards indicate the rupee would trade at 46.37 to the dollar in three months, compared with expectations of 46.02 yesterday. Forwards are agreements to buy or sell assets at a set price and date.

BONDS GAIN
Government bond prices rose on good buying support from banks and companies.

The 7.80 per cent government security maturing in 2021 shot up further to Rs 97.2450 from Rs 96.9650 yesterday, while its yield declined to 8.22 per cent from 8.26 per cent. The 8.08 per cent government security maturing in 2022 hardened to Rs 98.2750 from Rs 97.98, while its yield moved down to 8.32 per cent from 8.36 per cent.

The 8.13 per cent government security maturing in 2022 rose to Rs 98.61 from Rs 98.30, while its yield fell to 8.32 per cent from 8.37 per cent. The 7.83 per cent government security maturing in 2018, the 7.59 per cent government security maturing in 2016, the 8.07 per cent government security maturing in 2017 and the 8.28 per cent government security maturing in 2032 were also finished higher at Rs 97.8850, Rs 97.56, Rs 99.27 and Rs 97.2750, respectively.

The Reserve Bank of India, under the Liquidity Adjustment Facility, purchased securities worth Rs 46,580 crore from 28 bids at one-day repo auction at a fixed rate of 8.00 per cent and also sold securities worth Rs 700 crore from two bids at the one-day reverse repo auction at a fixed rate of 7.00 per cent.

CALL RATE FIRMS UP
The call rate recovered at the overnight call money market here on Wednesday due to fresh demand from borrowing banks. The overnight call money rate ended higher at 8.05 per cent, compared with yesterday's closing level of 8.00. It moved in a range of 8.07 per cent and 7.60 per cent.