Rupee continues to trade stronger

MUMBAI: The rupee continues to trade stronger on Wedenesday afternoon, despite the BSE Sensex erasing some of its early morning gains and increase in demand for the dollar from oil companies. It was trading at 51.35 against the dollar at 3pm, stronger than the 51.49 close on Tuesday.

The local unit has been rising in line with other Asian currencies and a global weakness for the dollar in what analysts are calling "return of the global risk appette."

"With every slight movement in the rupee-dollar, most importers and exporters are only unwinding their positions," says C Chandrasekhar, Senior Vice-President, Mecklai Financial. "However fundamentals are good for the local unit and I expect it to strengthen in the medium term," he said.

Dealers also spoke of oil related dollar demand seen around 51.35 with most expecting the rupee to trade in the range of 51.30-51.60 for the day. The dollar edged up against the euro on Wednesday in cautious trade ahead of a US interest rate decision, while pound also hit a 7-week low against the euro.

Bond yields were trading in a narrow range on Wednesday, with the market awaiting details of the central bank's Rs 10,600 crores buyback auction on Thursday. Dealers say the details of the buy back will decide the further trend for the bond market.

The yield on the new benchmark 6.05% paper expiring in 2019 traded at 6.46%, down 3 bps from Monday's close, after rising above 7% in the course of Friday. When yields fall, prices rise.

Call was trading at 4.60% at 3 pm, 110 bps higher than reverse repo rate, indicating pressure on liquidity.