Rupee falls for the second day

The rupee dropped for a second day on speculation that importers stepped up dollar purchases to meet payments before the March 31 financial year-end.

The currency extended this month’s losses after finance minister Pranab Mukherjee estimated India’s budget deficit would be 5.9 per cent of gross domestic product this financial year, compared with the government’s target of 4.6 per cent. Weak public finances are hampering India’s credit ratings, Moody’s Investors Service, Fitch Ratings and Standard & Poor’s said after the Budget presentation on March 16.

The rupee declined 0.3 per cent to 50.39 a dollar in Mumbai, according to data compiled by Bloomberg. It has lost 2.7 per cent this month in the worst performance after Malaysia’s ringgit among the 10 most traded Asian currencies, excluding the yen.

One-month implied volatility, a measure of exchange-rate swings used to price options, fell 50 basis points, or 0.50 percentage point, to nine per cent, according to data compiled by Bloomberg. Three-month onshore forward contracts traded at 51.50 a dollar, compared with 51.32 yesterday, and offshore non- deliverable contracts were at 51.57 a dollar from 51.34. Forwards are agreements to buy or sell assets at a set price and date.

Bonds settle mixed
Government securities (G-Secs) settled mixed on alternate bouts of buying and selling. The 8.79 per cent G-Sec maturing in 2021 improved to Rs 102.45 from yesterday’s close of Rs 102.41, while its yield softened from 8.42 per cent to 8.41 per cent. The 8.19 per cent G-sec maturing in 2020 moved up to Rs 98.54 from Rs 98.50, while its yield eased to 8.44 per cent from 8.45 per cent. The 7.83 per cent G-sec maturing in 2018 and the 7.02 per cent G-sec maturing in 2016 were also quoted higher at Rs 96.90 and Rs 95.00, respectively. However, the 9.15 per cent G-Sec maturing in 2024 declined to Rs 105.51 from Rs 105.58, while its yield inched up to 8.43 per cent from 8.42 per cent.

Call rate recovers
The call rate recovered at the overnight call money market on Tuesday, owing to demand from borrowing banks. The rate closed higher at nine per cent, compared with yesterday’s close of 8.75 per cent. It moved in a range of nine per cent and 8.80 per cent.