Forward premia negative, Re falls
Losses on the stock market, coupled with dollar outflows due to foreign investors pulling out of the market, forced the rupee to lose ground against the dollar on Friday.
By TNN |
MUMBAI: Losses on the stock market, coupled with dollar outflows due to foreign investors pulling out of the market, forced the rupee to lose ground against the dollar on Friday. The rupee ended the day at 39.62/63 against the dollar, down from Thursday’s close of 39.53/54. Negative signals emerging from other international markets dragged the rupee down after it started the day at 39.52/53 levels.
According to a trader with a private bank, there is a strong negative sentiment in the market and it is unlikely that the rupee will be seeing a rise any time soon. Much to the market’s surprise, the central bank chose not to intervene even as the rupee touched the 39.65-mark. “Earlier, we had seen nationalised banks selling dollars when the rupee breached the 39.60-mark in an attempt to arrest volatility,” said a trader. However, according to market sources, few exporters sold dollars during the day, which reigned in the rupee’s losses to some extent.
Further, there is a severe shortage of dollars after foreign investors repatriated IPO refund. This has resulted in forward premia taking a hit. The one-month contract has been trading at a discount, and slumped to a discount of 2.45% (0.80%). The six-month contract ended the day at 0.76% (1.28%) and the annual contract ended the day at 1.04% (1.31%).
Meanwhile, the bond market saw lacklustre movements. The yields on the benchmark paper, the 7.99% bond maturing in 2017 ended the day at 7.47%, unchanged from the previous close.
According to a trader with a private bank, there is a strong negative sentiment in the market and it is unlikely that the rupee will be seeing a rise any time soon. Much to the market’s surprise, the central bank chose not to intervene even as the rupee touched the 39.65-mark. “Earlier, we had seen nationalised banks selling dollars when the rupee breached the 39.60-mark in an attempt to arrest volatility,” said a trader. However, according to market sources, few exporters sold dollars during the day, which reigned in the rupee’s losses to some extent.
Further, there is a severe shortage of dollars after foreign investors repatriated IPO refund. This has resulted in forward premia taking a hit. The one-month contract has been trading at a discount, and slumped to a discount of 2.45% (0.80%). The six-month contract ended the day at 0.76% (1.28%) and the annual contract ended the day at 1.04% (1.31%).
Meanwhile, the bond market saw lacklustre movements. The yields on the benchmark paper, the 7.99% bond maturing in 2017 ended the day at 7.47%, unchanged from the previous close.
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