Rupee weakens on dearer crude oil

The rupee depreciated on speculation of oil importers buying dollars after crude prices climbed a third day.

Oil rose 0.7 per cent this week, following a decline of more than six per cent last week, according to data compiled by Bloomberg. Slowing economic growth due to increases in borrowing costs is probably deterring foreign investors, said Vikas Babu, a currency trader at Andhra Bank.

“Refining companies continue to buy dollars,” said Mumbai-based Babu. “The bias for the rupee in the coming day will be on the weaker side with higher interest rates eroding profitability, making it a less attractive destination.”

The rupee weakened 0.1 per cent to 44.8950 per dollar at close in Mumbai, according to data compiled by Bloomberg. The currency may trade between 44.50 and 45.30 until the end of this month, Babu predicted.

Gross domestic product rose 7.8 per cent in the three months ended March 31 from a year earlier, the slowest pace in five quarters, government data show. The central bank has boosted interest rates ten times since the start of 2010. The repurchase rate was last increased on June 16 and is 7.5 per cent. Offshore forwards indicate the rupee will trade at 45.42 in three months, compared with yesterday’s expectations for 45.47. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars.

BONDS DROP
Bonds dropped for the second day in a row on sustained profit-booking by corporates and banks.

The 7.80 per cent government security maturing in 2021 declined to Rs 97.00 from Rs 97.16 on Tuesday, while its yield rose to 8.25 per cent from 8.22 per cent. The 8.13 per cent government security maturing in 2022 also slipped to Rs 98.39 from Rs 98.55, while its yield went up to 8.35 per cent from 8.33 per cent.

The 8.08 per cent government security maturing in 2022 dipped to Rs 98.00 from Rs 98.23 yesterday, while its yield grew to 8.36 per cent from 8.33 per cent.

The 7.83 per cent government security maturing in 2018, the 8.26 per cent maturing in 2027 and the 7.99 per cent maturing in 2017 to finished weak at Rs 97.55, Rs 97.78 and Rs 98.25 respectively. The Reserve Bank of India under the Liquidity Adjustment Facility purchased securities worth Rs 97,970 crore from 47 bids at the one-day repo auction at a fixed rate of 7.50 per cent.

CALL RATE RECOVERS
THE call rate recovered half of its overnight losses on the overnight call money market today on enough liquidity in the banking system. After moving in a range of 7.75 per cent and 7.50 per cent, the call money rate concluded higher at 7.75 per cent from 7.70 per cent yesterday.