Rupee weakens most in 2 months

THE rupee weakened the most in almost two months as concern of Europe’s debt crisis worsening reduced the demand for emerging-market assets.

The rupee dropped 0.5 per cent, the most since May 16, to 44.72 per dollar at close in Mumbai, according to data compiled by Bloomberg. It had touched 44.765 earlier on Tuesday, the weakest level since June 30. India’s industrial production growth unexpectedly slowed in May, after the central bank extended the longest stretch of interest-rate increases in a decade.

BONDS GAIN
India’s 10-year bonds gained, pushing yields to a two-week low, on speculation that more cash in the banking system is spurring demand for fixed-income assets.

Lenders borrowed an average $4.2 billion from the central bank every day this month, according to data compiled by Bloomberg. A finance ministry official said the government may review its bond sale plan soon, because it isn’t comfortable with yields near the highest level since 2008. The yield on the 7.8 per cent government bonds due April 2021 fell four basis points to 8.28 per cent at close in Mumbai, the lowest since June 28. Benchmark 10-year yields touched 8.36 per cent last week, 10 basis points shy of a 32- month high reached on May 27.

CALL RATE DECLINES
THE call rate declined further on the overnight call money market here on Tuesday on surfeit of liquidity in the banking system, amidst lack of demand from borrowing banks.