Portfolio inflows lift Re to record high

MONEY MARKET ROUND-UP

Forex: Re ends at nine-year high

The spot rupee breached the crucial barrier of 40 to close at a nine-year high of 39.88/89 . The appreciation has been primarily on the back of huge foreign exchange inflows into the Indian market and also partly due to impact of dollar weakness globally.

Pound sterling and euro appreciated to $2.0075 ($1.9991) and $1.4040 ($ 1.3967) globally. The rupee had reached a high of 39.22 to a dollar in first quarter of 1998.

Besides portfolio inflows into the Indian equity market, banks and exporters also sold dollars frantically since they were expecting the rupee to depreciate to 40.30 through purchase of dollars by the central bank's part of intervention. The RBI was seen intervening in the market in the beginning of the trading session but it gave up later since inflows were huge, said a dealer.

Money: Call rates end high

The system was flush with liquidity, since the RBI received bids worth Rs 7000 crore. However, some banks were expecting higher inflows and call rates to plunge further. However, these banks were caught offguard and rushed to fund their open positions ahead of the weekend. Thus, the call rates closed at a high of 7 per cent. The rates in the collateralised lending and borrowing market closed higher at 6.80 per cent.

G-sec: Prices rise by 5-10 paise

The sentiment in the government securities market remained lacklustre. Most banks refrained from taking fresh positions in the market ahead of the second quarter ending in September. Prices of securities rose by 5-10 paise across maturities and the yield on the benchmark 10-year paper closed at 7.81per cent against 7.82 per cent on Wednesday.

Dealers expect the trading to hasten in the coming weeks, since banks will have to push down the yields of the government papers and book profit in the investment portfolio.

OIS and derivatives: Volumes stay thin

Tracking the government securities markets, the sentiment in the overnight interest rate swap market remained jittery and volumes thin. The interest rate in the OIS for benchmark maturity of one-year went up to 6.86 per cent against 6.73 per cent. The concern on liquidity in the short term seen in government securities was reflected in the OIS rates, especially in the short-term.

In the secondary market, Canara bank raised one-year money through certificate of deposit at 8.5 per cent . Incidentally, two days back nine-month money was available at 8.55 per cent, said a dealer.

Primary issuers in the long term bond market are waiting for the interest rate to stabilise.

Global markets: Yen takes a knock

Both euro and pound sterling appreciated to dollar and ruled at $2.0075 ( $ 1.9991) and $ 1.4040 ( $ 1.3967) globally. Yen, however, depreciated to dollar to hover at 115.20 ( $ 115.86 ).