Rupee drops to three-week low

The rupee fell to the lowest level in more than three weeks as investors sought the dollar’s perceived safety on concern Europe’s debt crisis was worsening. The dollar index, which tracks the greenback against six major currencies, rose 0.9 per cent in the past week. Moody’s Investors Service yesterday cut credit outlooks for Germany, the Netherlands and Luxembourg. Further losses in the rupee might be limited on optimism that India will boost efforts to attract investment after former finance minister Pranab Mukherjee was elected President over the weekend, according to JPMorgan Chase & Co.

Debt problems in the Euro area “have helped the strong dollar theme,” analysts at JP Morgan, including Mumbai-based Abhishek Panda, wrote in a research report. “India’s presidential elections concluded last weekend and the government is expected to move toward fiscal consolidation and attracting more capital flows.”

The rupee declined 0.3 per cent to 56.12 per dollar, according to data compiled by Bloomberg. It touched 56.18 earlier, the weakest level since June 29.

Bonds react downwards
Government bonds reacted downwards on heavy selling pressure from banks and companies. The 9.15 per cent government security maturing in 2024 dipped to Rs 106.60 from 106.74 previously, while its yield edged up to 8.28 per cent from 8.26 per cent.

The 8.15 per cent government security maturing in 2022 fell to Rs 100.52 from 100.55, while its yield held steady at 8.07 per cent. The 8.33 per cent government security maturing in 2026 slid to Rs 101.04 from Rs 101.13, while its yield inched up to 8.20 per cent from 8.19 per cent.

Call rates remain stable
The overnight call money market remained steady, as demand from borrowing banks matched supplies. The rate finished stable at eight per cent. It moved in a range of 8.05 per cent and 7.95 per cent.