Rupee weakens on US concerns

The rupee fell the most in three weeks on concern of a slowing US economy stalling the global economic recovery, sapping demand for emerging-market assets.

The currency declined after a report showed yesterday that manufacturing in the world’s largest economy dropped to a two- year low in July. Foreign investors sold $140.2 million more Indian shares than they bought on July 29, the most in two weeks, according to exchange data.

The MSCI Asia-Pacific Index of regional stocks fell by the most since July 12, while the Bombay Stock Exchange’s Sensitive Index lost 1.1 per cent. “The US data has affected the region’s currencies as it has once again raised questions about the recovery,” said Roy Paul, deputy general manager at Federal Bank Ltd. in Mumbai. “There are probably some concerns about fund inflows.”

The rupee weakened 0.5 per cent to 44.28 per dollar at the close in Mumbai, the biggest drop since July 12, according to data compiled by Bloomberg. India’s current-account deficit may widen to 2.7 percent of gross domestic product in the financial year ending March 2012 from 2.6 per cent of GDP last year, according to a report published by the Prime Minister’s Economic Advisory Council yesterday.

BONDS FIRM UP
Government bonds firmed up on fresh buying support from banks and companies. The 7.80 per cent government security maturing in 2021 hardened to Rs 95.85 from Rs 95.68 yesterday, while its yield moved down to 8.43 per cent from 8.46 per cent. The 8.08 per cent government security maturing in 2022 rose to Rs 96.84 from Rs 96.68, while its yield eased to 8.53 per cent from 8.55 per cent. The 8.13 per cent government security maturing in 2022 firmed up to Rs 97.10 from Rs 96.97, , while its yield looked down to 8.54 per cent from 8.56 per cent. The 7.83 per cent government security maturing in 2018 and the 8.07 per cent government security maturing in 2017 were also ended higher at Rs 96.80 and Rs 98.40, respectively.

The Reserve Bank of India, under the Liquidity Adjustment Facility, purchased securities worth Rs 31,615 crore from 27 bids at one-day repo auction at a fixed rate of 8.00 per cent and also sold securities worth Rs 300 crore from one bid at one-day reverse repo auction at a fixed rate of 7.00 per cent.

CALL RATE RECOVERS
The call rate eased to 8.00 per cent on the overnight call money market here on Tuesday, owing to ample liquidity available in banking system.