US payroll data boosts forex inflows, liquidity remains easy

MONEY MARKET ROUND-UP

Forex: Inflows dent Re gains
Even though the equity market remained flat, the spot rupee, which opened at 40.75/76, rose to an intraday high of 40.60 to a dollar.

According to dealers, the sharp rise came on the back of forex inflows from portfolio investors who have started coming back to emerging markets once the sentiment in the US and European markets have become bearish.

This has been primarily due to the subprime concern and an outlook of moderate economic growth on the back of non-farm payroll data.

However, the dollar demand from oil companies for import payments led the spot rupee to fall and close at 40.66 to a dollar.

The annualised premium for the six-month and one-year forward dollars closed at 1.29 per cent and 1.50 per cent, respectively.

Dealers are of the view that if the rupee falls below 40.50, there will be panic selling of dollars by exporters. On the contrary, the RBI may buy dollars to prevent sharp appreciation of the rupee against the dollar.

Money: Call at 6.05/6.10%
Liquidity remained comfortable even as banks prepared for advance tax outflows. "In fact, liquidity surplus is to the tune of Rs 27,000-30,000 crore. Even if the advance tax outflows are to the tune of Rs 30,000-35,000 crore, market players strongly believe that RBI may not have to inject liquidity through the repo route," said a dealer.

Call rates ruled around 6.05/6.10 per cent. In CBLO, banks could get funds through government securities collateral at below 6 per cent.

G-sec: Prices move up
The weak non-farm payroll data has pushed down yields of the ten-year papers from 4.51 per cent to 4.36 per cent. "While the market was bettting on Fed rate move in the forthcoming Fed Open Market Committee meeting, the weak data has reinforced the view that there will be a rate cut. Now, the only question remains is about the quantum of rate cut," said a PSU bank dealer.

This in turn has triggered a view that once Fed cuts rates, the hardening rate regime across the globe may ease including that in India. This led to brisk trading in gilts where the prices moved up by 20-40 paise across maturities.

The yield on the benchmark ten-year paper closed at 7.86 per cent as against 7.90 per cent last week.

OIS and derivatives: Rates on CPs, CDs dive
State Bank of India tapped the market to raise around Rs 2,000-3,000 crore through upper tier II issue of 15 year with call option at 10 year at 10 per cent. Similarly, REC raised Rs 300 crore through 10-year bonds at 9.85 per cent.

Interest rates on commercial papers and certificate of deposits have come down sharply tracking the government securities market. Now, the nine-month funds are available at 8.95 per cent as against 9.15 per cent last week.

Global markets: $ on weak grounds
The dollar weakened against all major currencies on the back of weak non-farm payroll data. The euro and the pound gained against the dollar and ruled around $1.38 ($1.3693) and $2.0320 ($2.0212).

The yen gained substantiality and ruled at $113.55 ($115.16).