Rupee down on high oil prices

The rupee dropped the most in a week on concern that higher crude prices would widen the nation’s current-account deficit.

The currency fell for the first time in four days, as oil rose to the highest level in more than three months in New York on signs of shrinking stockpiles in the US and amid speculation European leaders would make progress in containing their region’s debt crisis. India’s current account deficit could widen, from 2.6 per cent of gross domestic product in the financial year through March, if oil prices continue to push up the import bill, the central bank said last month.

“The current-account deficit is one of the key reasons why the rupee has underperformed Asian peers in times of portfolio outflows,” said Dariusz Kowalczyk, a senior strategist at Credit Agricole CIB in Hong Kong.

The rupee declined 0.8 per cent to 49.48 per dollar in Mumbai from November 4, according to data compiled by Bloomberg, after falling 0.7 per cent last week. Indian financial markets were shut yesterday on account of a public holiday. Offshore forwards indicate the rupee would trade at 50.23 to the dollar in three months, compared with expectations for a rate of 49.97 on November 4.

BONDS DROP
Government bonds on Tuesday dropped further due to sustained selling pressure from banks and companies.

The 7.83 per cent government security maturing in 2018 declined to Rs 94.65 from Rs 94.97 previously, while its yield firmed up to 8.94 per cent from 8.87 per cent. The 7.80 per cent government security maturing in 2021 drifted lower to Rs 92.27 from Rs 92.66, while its yield rose to 9.03 per cent from 8.97 per cent.

The 8.13 per cent government security maturing in 2022 fell at Rs 93.64 from Rs 94.05, while its yield hardened to 9.06 per cent from 9.00 per cent. The 8.08 per cent government security maturing in 2022, the 8.28 per cent government security maturing in 2027, the 7.99 per cent government security maturing in 2017 and the 8.26 per cent government security maturing in 2027 also quoted lower at Rs 93.40, Rs 93.40, Rs 95.70 and Rs 93.32, respectively.

The Reserve Bank of India, under the Liquidity Adjustment Facility, purchased securities worth Rs 87,955 crore from 29 bids at the one-day repo auction at a fixed rate of 8.50 per cent.

CALL RATE RECOVERS
The call rate recovered at the overnight money market , owing to fresh buying support from borrowing banks. The overnight call rate finished higher at 8.65 per cent from last Friday’s close of 7.75 per cent. It moved in a range of 8.70 per cent and 8.50 per cent.