Wednesday, March 04, 2009

Rupee closes at 51.55 new record low

MUMBAI: The rupee ended higher for the first time in eight sessions closing at 51.55 against the dollar, as modest gains posted by Indian shares raised hopes that capital outflows would slow in the coming weeks.

Dealers also said selling by dollars spoke of foreign banks aided the sentiment, but warned that its only a matter of time before the slide in the local unit begins again.

The rise in the rupee was capped by the dollar surge against major global currencies. Liquidity was good with banks parking close to Rs 68,000 crores with the RBI as a part of its daily liquidity operations.

"There was not much activity in the market today, although some foreign banks did sell dollars to take advantage of the all-time low dollar levels," said Navin Raghuvanshi, associate vice president at DCB. "But there was no intervention from RBI."

Leading currency experts led by AV Rajwade have been making their case for greater central bank support for the rupee, as the recent volatility has unnerved many sections of the economy.

The rupee has fallen close to 5% in the past few sessions and 6.7% in 2009. Barclays expects the rupee to weaken to 56 by June.

The day it breached 52 for the first time on Tuesday, Shyamala Gopinath, deputy governor of the Reserve Bank of India said RBI was monitoring forex market developments and remedial steps would be taken at an appropiate
time.

Bonds ended lower as expectations of an immdiate rate cuts are slowly vanishing from the market. While the yield on the old 10-year benchmark 8.24% paper maturing in 2018 rose 5 basis points to 6.37%, the new benchmark 6.05% paper expiring in 2019 gained 5 bps to close at 6.13%.

When yields rise, bond prices fall. Dealers also said that many firms were seen selling their holdings to make way for new auction on Friday.

RBI has announced another buyback of dated government securities worth Rs 6,000 crore with a green-shoe option of Rs 3,000 crore through an auction on Thursday.

On Friday, it will sell three dated securities for Rs 12,000 crore. Dealers said these two events would dictate yields in the coming days.

Source: economictimes.indiatimes.com

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