Rupee snaps 2-day decline

The rupee advanced, snapping a two-day decline, after global funds added to holdings of local shares to benefit from the nation’s economic growth.

The currency traded near a two-month high after foreign investors bought $460 million more Indian stocks than they sold in the first two days of this week, taking net purchases this year to $1.6 billion, according to exchange data.

India’s $1.3 -trillion economy expanded 7.8 per cent in the first quarter of 2011 from a year earlier, compared with 8.3 per cent in the previous three months, government data showed.

“Any foreign investment into Indian assets is good for the economy and the rupee,” said Paresh Nayar, the Mumbai-based head of money markets and currency at FirstRand Ltd.

The rupee strengthened 0.2 per cent to 44.42 per dollar at close in Mumbai, according to data compiled by Bloomberg. The currency touched 44.3350 yesterday, matching a two-month high reached on July 4.

Offshore forwards indicate the rupee would trade at 44.94 to the dollar in three months, compared with expectations of 44.99 yesterday. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars.

BONDS END WEAK
Government securities finished weak on selling by some banks and companies.

The 7.80 per cent government security maturing in 2021 dropped to Rs 96.31 from Rs 96.51 yesterday, while its yield rose to 8.36 per cent from 8.33 per cent. The 8.13 per cent government security maturing in 2022 also declined to Rs 97.6150 from Rs 97.76, while its yield moved up to 8.46 per cent from 8.44 per cent previously.

The 8.08 per cent government security maturing in 2022 too dipped to Rs 97.30 from Rs 97.50, while its yield firmed up to 8.46 per cent from 8.43 per cent.

The 7.83 per cent government security maturing in 2018, 8.26 per cent maturing in 2027 and 7.27 per cent maturing in 2013 ended lower at Rs 97.11, Rs 96.70 and Rs 98.20, respectively.

The Reserve Bank of India, under the Liquidity Adjustment Facility, purchased securities worth Rs 7,560 crore from eight bids at one-day repo auction at a fixed rate of 7.50 per cent.

CALL RATE DROPS
The call reacted downwards on the overnight call money market on Thursday due to surfeit of liquidity in the banking system.

After moving in a range of 7.60 per cent and 7.35 per cent, the overnight call money rate settled lower at 7.45 per cent from 7.57 per cent yesterday.