Re falls 38 paisa to 49.69 against $, bonds rally back
The rupee on Wednesday closed down 38 paisa at Rs 49.69 to the dollar, as the latter gained against other currencies, and uncertainty over the poll outcome drove importers and banks to buy dollars.
By ET Bureau |
MUMBAI: The rupee on Wednesday closed down 38 paisa at Rs 49.69 to the dollar, as the latter gained against other currencies, and uncertainty over the poll outcome drove importers and banks to buy dollars.
However, government bonds rallied towards the fag end of trading as exit polls showed the ruling coalition ahead in the race for forming a government, which inspired confidence among traders, a day before a scheduled bond auction. The yield on the 6.05% note, due in February 2019, fell 8 basis points to 6.33%, even as banks parked Rs 1.33-lakh crore with RBI during its daily money market operations.
���Traders earlier discounted the possibility of a hung Parliament, which pushed yields higher,��� says Anoop Verma, associate vice-president at DCB. Primary dealers, however, say bonds are likely to give up the gains when the market reopens on Thursday as traders are expected to sell bonds to raise cash for participating in the auction. They also attributed the gains in bonds to liquidity support, which is making them attractive at current levels.
The rupee���s fall was mainly on the back of gains in the dollar overseas. The dollar rebounded from a 4-month low on Wednesday, rallying against the sterling after the Bank of England said it expected the economy to recover only slowly.
A revival in capital inflows since March has pulled the rupee up 5% from record lows of 52.20 to the dollar. Foreign funds have been net buyers of more than $2.5 billion of equities since the beginning of April.
Standard Chartered Bank analysts said the highest degree of uncertainty would result from a Third Front of several smaller parties coming to power. ���Risks of instability and fears of another round of elections could also grip the market,��� StanChart wrote in a note.
However, government bonds rallied towards the fag end of trading as exit polls showed the ruling coalition ahead in the race for forming a government, which inspired confidence among traders, a day before a scheduled bond auction. The yield on the 6.05% note, due in February 2019, fell 8 basis points to 6.33%, even as banks parked Rs 1.33-lakh crore with RBI during its daily money market operations.
���Traders earlier discounted the possibility of a hung Parliament, which pushed yields higher,��� says Anoop Verma, associate vice-president at DCB. Primary dealers, however, say bonds are likely to give up the gains when the market reopens on Thursday as traders are expected to sell bonds to raise cash for participating in the auction. They also attributed the gains in bonds to liquidity support, which is making them attractive at current levels.
The rupee���s fall was mainly on the back of gains in the dollar overseas. The dollar rebounded from a 4-month low on Wednesday, rallying against the sterling after the Bank of England said it expected the economy to recover only slowly.
A revival in capital inflows since March has pulled the rupee up 5% from record lows of 52.20 to the dollar. Foreign funds have been net buyers of more than $2.5 billion of equities since the beginning of April.
Standard Chartered Bank analysts said the highest degree of uncertainty would result from a Third Front of several smaller parties coming to power. ���Risks of instability and fears of another round of elections could also grip the market,��� StanChart wrote in a note.
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RBI will sell government bonds worth Rs 12,000 crore on Thursday. Data earlier this week showed industrial production fell for the third time in four months in March, prompting many analysts to suggest that the central bank may soon need to employ monetary measures to stimulate the economy. Too busy to trade in stocks? Invest in Mutual Funds with ET Money!
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