Re slumps to new low at 47.07/08

MUMBAI: The rupee slumped to its lowest level in more than five years on Friday as the strengthening of the dollar against other international currencies as well as losses on the local stock markets dented market sentiment.

However, heavy dollar sales by a large corporate as well as the central bank at 47.30-per-dollar levels propped up the local unit. The rupee finally ended the day at 47.07/08 levels against the dollar, dipping from its previous close of 46.62/63. Both forex and bond markets were closed for trading on Thursday.

The rupee had opened weaker than the 47-mark at 47.15/17-levels and weakened steadily. According to market sources, nationalised banks sold dollars to stem the rupee���s fall.

Also, dollar sales by Essar helped the rupee recover from its losses. However, sentiment for the rupee was further dampened by losses on the local stock markets, with the 30-share benchmark BSE Sensex ending the day 529 points in the red.

With the dollar rising to one-year peaks against major currencies like the euro and the pound, sentiment for the rupee continues to remain bearish. Some market participants even see the rupee depreciating beyond the 48-per-dollar mark in the weeks to come.

Meanwhile, bond yields dipped as global crude prices eased out. This, according to market participants, led dealers to pick up fresh positions, with the hope that inflation would ease in the weeks to come.

Yields on the 10-year benchmark bond, the 8.24% bond maturing in 2018, ended the day at 8.29%, 17 basis points lower than its previous close of 8.46%.

Inter-bank call rates also remained high, and touched a high of 16% during the day. Call rates finally ended the day at 14%, after transactions worth Rs 17,414 crore were carried out.

According to market participants, rumours that inflation would be lower than last week also boosted market sentiment.
However, cash conditions continued to remain under strain, with banks borrowing a Rs 90,725 crore from the central bank, over both the daily liquidity adjustment windows.

Tight cash conditions brought about by heavy RBI intervention in the forex market, as well as corporates making their advance tax payouts, have led to banks borrowing record amounts from RBI in the past couple of weeks.

Inter-bank call rates also remained high, and touched a high of 16% during the day. Call rates finally ended the day at 14%, after transactions worth Rs 17,414 crore were carried out.

Rates on the CBLO market, where banks and other financial institutions borrow funds by placing surplus government bonds as collateral, ended the day at 8.93% after transactions worth Rs 14,988 crore were struck.