Rupee slips on dollar buys by importers

The rupee fell, reversing earlier gains, on speculation importers used the currency’s rise to a week’s high today to buy cheaper foreign exchange.

The local currency fell for the first time in three days as companies such as Indian Oil Corp, the nation’s largest refiner, bought dollars to benefit from the rupee’s rise to a one-week high earlier today, said Vikas Babu, a currency trader at state-owned Andhra Bank.

The rupee fell 0.1 per cent to 46.3375 a dollar at the 5 pm close in Mumbai, according to data compiled by Bloomberg. The rupee was the worst-performing among 10 Asia-Pacific currencies outside Japan today. It reached 46.1350 earlier today, the highest since November 26.

The rupee rose on speculation that accelerating economic growth will prompt global investors to add to this year’s record purchases of the nation’s assets.

Global funds bought $1.2 billion more of Indian equities than they sold last month, helping drive the benchmark Bombay Stock Exchange’s Sensitive Index 79 per cent higher this year. A government report this week showed the $1.2-trillion economy expanded 7.9 per cent in the three months ended September 30, the fastest pace in six quarters.

Bonds drop for a fourth day
India’s benchmark bonds fell for a fourth day, the longest losing streak in two months, as the government prepared to sell Rs 10,000 crore ($2.15 billion) of debt later this week. Yields on the most-traded securities due 2019 rose to the highest level in more than two weeks on speculation that faster growth in Asia’s third-largest economy will prompt the central bank to raise borrowing costs.

“Debt supply has now become a concern because the macro-economic situation is weakening the sentiment for bonds,” said Srinivasa Raghavan, head of treasury in Mumbai at IDBI Gilts, a primary dealer that underwrites government debt sales.

“The bias is for yields to rise.”
The yield on the 6.9 per cent note due July 2019 rose two basis points, or 0.02 percentage point, to 7.35 per cent as of 9:25 am in Mumbai, according to the central bank’s trading system. The price fell 0.12 per cent, or 12 paise per Rs 100 face amount, to Rs 96.93.

Reserve Bank of India Governor Duvvuri Subbarao last week indicated there was a need to end some of the “unconventional” measures policy makers adopted since October 2008 to accelerate growth.

India’s $1.2-trillion economy might grow about 7 per cent in the year to March 31, Finance Minister Pranab Mukherjee said in New Delhi on November 30 after the statistics bureau released data for the quarter ended September 30. India’s economy grew 7.9 per cent in the period from a year earlier.

The cost of five-year interest-rate swaps, or derivative contracts used to guard against fluctuations in borrowing costs, increased. The rate, a fixed payment made to receive floating rates, rose to 6.69 per cent from 6.6 per cent yesterday.