Firms Profit As, Drop Vs $

Hectic activity was witnessed on the pound sterling and yen counters due to the currencies slide vis-a-vis the dollar in last few days.

The pound shed over four per cent while the yen went down nearly 350 basis points against the greenback internationally.

Spot rupee against the US currency is moving in a narrow band of Rs 35.69-Rs 35.72 for the past few days, giving banks no speculative opportunity.

Glut in dollar supply at the local markets and token intervention by the RBI has kept the rupee on a tight leash.

Some corporate treasuries have made a fortune in the past two days capitalising on the weak pound and yen. The pound weakened to 1.6230 against the dollar on July 29 from a six-month high of 1.6986 on July 10.

The UK currency was making attempts to seek lower levels at 1.6160 yesterday. However, no deals were confirmed. In spot rupee vs pound terms, this means a hardening of the Indian currency to Rs 58.08 on July 29 from Rs 60.64 levels on July 10.

Similarly, yen, too, shed ground against the dollar by nearly 3.50 per cent to 118.75 yesterday from a high 110.50 on June 11. The Japanese currency, which was ruling at a high of around 127.45 on May 1, has been seeking easing bottoms all through June and July.

Sentiment is distinctly bearish for the Japanese currency. Three days back, on July 27, yen changed hands at 114.70; on July 29, it slipped to 118.45 but covered ground on July 30 at 118.75, a dealer said.

In rupee vs yen terms, this means local currency rose to Rs 30.06 yesterday from Rs 31.12 on July 27. Many corporates having receivables in January and February covered it in the past two days. This they did both for the sterling pound as well as for the yen giving them windfall gains, a dealer with a foreign bank said. One corporate raked in about Rs 50 lakh by covering part of his export receivables yesterday, a dealer said.

The reasons for the depreciating sterling given by treasury heads is that the market was expecting a hike in the UK base interest rate by 50 basis points from 6.5 per cent ruling since June 6. Banks and international traders went long on the sterling and took huge positions. However, the rates were increased by 25 basis points to 6.75 per cent on July 10.

Trades started un-winding their long outstandings. Further, banks also viewed cabel levels at pound 1.7 as very high which triggered off the band wagon, a corporate treasury chief said.

Yen will continue to test new bottom as the Bank of Japan has postponed hiking of interest rates by another six months from current levels of half a per cent.