Rupee falls; bonds extend rally, call rate slips

Fresh demand from importers for the dollar as it strengthened abroad led the rupee to fall for the first time in three sessions on Wednesday and close three paise lower at 61.55 against the US currency.

At the interbank foreign exchange market, the rupee opened lower at 61.65 a dollar from Monday's close of 61.52 and declined further to a low of 61.7150. However, the local currency bounced back to a high of 61.4250 before closing at 61.54, a fall of two paise. Support for the rupee came as local stocks advanced after wholesale inflation eased to a five-month low in December, raising hopes the Reserve Bank will keep interest rates on hold.

Government bonds continued to rally on consistent buying support from banks and corporates amid optimism that the Reserve Bank of India (RBI) will keep interest rates on hold following easing inflationary pressure.

The 8.83 per cent government security maturing in 2023 shot up to Rs 101.2325 from Rs 100.76, while its yield declined to 8.64 per cent from 8.71 per cent previously. The 8.28 per cent government security maturing in 2027 strengthened to Rs 94.72 from Rs 94.0750, while yield dropped to 8.95 per cent from 9.04 per cent. The overnight call money rate ended lower at 8.55 per cent from 8.75 per cent on Monday. It fluctuated between a high of 8.80 per cent and a low of 7.70 per cent.