Rupee trims gains on higher WPI inflation

Yet, it closed stronger against US dollar over Friday's level

The rupee gave up part of the gains seen in early trade on the higher than expected reading on the Wholesale Price Index-based inflation for August, that rose 6.1 per cent compared with 5.8 per cent in July. Yet, it closed stronger against the US dollar over Friday’s level.

The rupee had opened stronger in the morning session, tracking the Asian markets where the dollar weakened as former US Treasury Secretary Lawrence Summers withdrew his bid to become Federal Reserve chairman.

Treasury executives said the rupee was strong in the morning on expectation that Summers opting out of the race would mean the Fed going at slow pace with tapering. The inflation data dented some gains. Also, there was some dollar buying in post afternoon trading by importers. The rupee closed at 62.85 to a dollar. It had opened at 62.64 after Friday’s close at 63.50.

Bond firms up further
Government securities (G-secs) firmed up further on sustained buying support from banks and companies.

The 7.16 per cent G-sec maturing in 2023 rose further to Rs 91.70 from Friday's close of Rs 91.34, while its yield fell to 8.43 per cent from 8.49 per cent. The 7.28 per cent G-sec maturing in 2019 moved up to Rs 93.18 from Rs 93.03, while its yield declined to 8.82 per cent from 8.86 per cent.

The 8.28 per cent G-sec maturing in 2027 also shot up to Rs 96.10 from Rs 95.77, while its yield dropped to 8.77 per cent from 8.81 per cent.

The 8.33 per cent G-sec maturing in 2026, the 8.20 per cent G-sec maturing in 2025 and the 8.12 per cent G-sec maturing in 2020 were also quoted higher at Rs 95.1975, Rs 94.37 and Rs 96.27, respectively.

Call rate ends higher
Call money rates also finished higher at the overnight market on Monday, due to good demand from borrowing banks.

The overnight rate ended higher at 10.2 per cent. It moved in a range of 10.7 per cent and 10.2 per cent.

The Reserve Bank of India under the liquidity adjustment facility purchased securities worth Rs 39,933 crore in 65-bids at the one-day repo auction, at a fixed 7.25 per cent, while it sold securities worth Rs 13 crore from two-bids at the one-day reverse repo auction at a fixed 6.25 per cent in the evening.