Rupee gains most in a week

The rupee strengthened the most in almost a week after US lawmakers agreed on a plan to increase the nation’s debt limit, bolstering the appeal of emerging-market assets.

The currency advanced, as the Bombay Stock Exchange’s Sensitive Index of shares snapped a four-day loss after President Barack Obama said US Congressional leaders reached an agreement that would “reduce the deficit and avoid default.” Foreign investors bought $592 million more debt than what they sold last month through July 28, raising holdings to $21.3 billion, according to exchange data.

“The US news has been positive as we are seeing risk- aversion being toned down,” said Vikas Babu, a Mumbai-based foreign-exchange trader at Andhra Bank. “We have to see how the exact debt deal moves on as too deep a cut in spending could affect the Indian markets negatively.”

The rupee strengthened 0.3 per cent to 44.07 per dollar at the close in Mumbai, the biggest gain since July 26, according to data compiled by Bloomberg. It advanced 1.2 per cent last month, the most since March.

Offshore forwards indicate the rupee would trade at 44.44 to the dollar in three months, compared with expectations for a rate of 44.65 on July 29. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars.

Bonds end mixed
The 7.80 per cent government security maturing in 2021 moved down to Rs 95.68 from 95.71 previously, while its yield inched up to 8.46 per cent from 8.45 per cent.

The 8.13 per cent government security maturing in 2022 declined to Rs 96.97 from Rs 97.03, while its yield edged up to 8.56 per cent from 8.55 per cent. The 8.07 per cent government security maturing 2017 also quoted lower at Rs 98.34 from 98.35, while its yield looked up to 8.46 per cent from 8.45 per cent.

However, the 7.83 per cent government security maturing in 2018 moved up to Rs 96.75 from Rs 96.72, while its yield softened to 8.47 per cent from 8.48 per cent. The 7.59 per cent government security maturing in 2016 also rose to Rs 96.95 from Rs 96.84, while its yield declined to 8.38 per cent from 8.41 per cent.

The Reserve Bank of India, under the Liquidity Adjustment Facility, purchased securities worth Rs 45,830 crore from 27 bids at the one-day repo auction at a fixed rate of 8.00 per cent.

Call rate recovers
The call rate recovered smartly to end at 8.05 per cent at the overnight call money market today due to fresh demand from borrowing banks. The call money rate closed than last Friday’s closing level of 7.65 per cent.