Dollar in short supply as rain-hit traders stay home

MUMBAI: Crippling rains in Mumbai caused a dollar shortage in the forex market pushing the Indian currency down to close at Rs 46.08/09 a dollar.

The dollar rose after most treasury dealers and back offices shut early because of the rains which also led to a 70% drop in volumes in the government securities market.

Treasury managers said that many forex and bond dealers could not make it to work because of heavy rains.

Continuing bad weather forced even those who attended to shut shop early by squaring off their positions much before closing hours. In the foreign exchange market, up to 25% of players did not participate actively on the market, due to which the rupee weakened by nearly 5-10 paise in intra-day trade.

The domestic currency opened at 46.06/09 levels and hovered in the 46.02/06 range for most of the day. However, inspite of a good demand-supply scenario, wherein foreign banks bought a sizeable amount of dollars and adequate supply came in from private banks, the rupee closed weaker at 46.08\09 levels per dollar.

However, Partha Mukherjee, UTI Bank’s head-treasury, explained, “Trading volumes have dipped sharply in the forex, bond and equity markets. This could be a temporary phase and markets in Mumbai are quite sturdy enough to resume to normalcy once rains recede.”

He added markets would continue to remain in a state of flux over the next few days and a proper direction could emerge only after RBI’s quarterly review on the credit and monetary policy statement.

On the government securities market, till last week, the average daily trading volumes in the NDS-OM segment were approximately around Rs 1,000 crore. At the beginning of this week, volumes dipped by 50% to Rs 400-500 crore, while on Tuesday and Wednesday, the daily traded volumes in gilts slipped to less than Rs 300 crore. In fact, volumes were higher than Rs 1,600 crore a month ago.

The yield on the benchmark 7.59% ’16 government stock hovered at around 8.15% for the past couple of days with slight movement seen only in the yield of the 5-year 9.39% ’11 paper. SR Kamath, general manager, STCI said that the sentiment in the bond street was quite lacklustre on account of dealers awaiting the announcement of the scheduled bond auction between July 3 and 11.

The wet spells over the last few days only added to the weak sentiment, by lowering the traded volumes. A senior manager at a state-owned bank said that the auction announcement would act as a good trigger to bolster the market sentiments.