Re ends strong, call rates slip
The rupee retreated from a one-week high registered on Tuesday, as the stock market slipped again.
By ET Bureau |
MUMBAI: The rupee retreated from a one-week high registered on Tuesday, as the stock market slipped again. However, the dollar���s fall against some other currencies helped it hold on to some gains, with the currency closing below the 50-mark against the dollar.
Indian overnight call money rates ended lower on Tuesday, as banks had sufficient funds indicating sufficient liquidity. Bonds largely held on to their gains in earlier sessions on talk that the Reserve Bank of India (RBI) will announce rate cuts any moment now.
The rupee closed at 49.93 against the dollar, off a high of 49.70, but still 0.3% stronger than Monday���s close of 50.09. It had hit a record low of 50.60 last week.
Dealers said that volumes were small, although there was some dollar demand from oil firms. Indian benchmark BSE Sensex fell 2.3% after an early rally gave way to deeper concerns about sluggish consumer spending. The yen gained against the euro and the dollar, as global recession fears returned to haunt financial markets, sending stock markets lower, as investors shunned higher risk assets.
The rupee has been under pressure ever since foreign institutional investors began pulling out funds from equity markets since the beginning of 2008 after emergence of US mortgage problems. The current calendar year so far has registered capital outflow of more than $13 billion.
The central bank absorbed a net Rs 720 crore from the system through its twin money market operations, indicating sufficient funds in the system. Call rates closed at 6.60%, lower from its previous close of 6.90%.
India���s 10-year bond yields held at the lowest in almost three years on speculation slowing inflation will allow the central bank to cut interest rates for a third time since October 20. They ended the day at 7.23% though marginally higher than Monday���s close. When yields rise, prices fall.
Indian overnight call money rates ended lower on Tuesday, as banks had sufficient funds indicating sufficient liquidity. Bonds largely held on to their gains in earlier sessions on talk that the Reserve Bank of India (RBI) will announce rate cuts any moment now.
The rupee closed at 49.93 against the dollar, off a high of 49.70, but still 0.3% stronger than Monday���s close of 50.09. It had hit a record low of 50.60 last week.
Dealers said that volumes were small, although there was some dollar demand from oil firms. Indian benchmark BSE Sensex fell 2.3% after an early rally gave way to deeper concerns about sluggish consumer spending. The yen gained against the euro and the dollar, as global recession fears returned to haunt financial markets, sending stock markets lower, as investors shunned higher risk assets.
The rupee has been under pressure ever since foreign institutional investors began pulling out funds from equity markets since the beginning of 2008 after emergence of US mortgage problems. The current calendar year so far has registered capital outflow of more than $13 billion.
The central bank absorbed a net Rs 720 crore from the system through its twin money market operations, indicating sufficient funds in the system. Call rates closed at 6.60%, lower from its previous close of 6.90%.
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Dealers say that liquidity is adequate is adequate in the system due to which there is no pressure on call rates. The only cash factor that could push rates up from current levels is RBI���s intervention in the forex market to stem a sharp fall in the rupee. India���s 10-year bond yields held at the lowest in almost three years on speculation slowing inflation will allow the central bank to cut interest rates for a third time since October 20. They ended the day at 7.23% though marginally higher than Monday���s close. When yields rise, prices fall.
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