Rupee falls by 6 paisa, to trade at 49.22 against the dollar

MUMBAI: The rupee continues to trade in a small range, and was down 6 paisa at 2.30 pm, to trade at 49.22 against the dollar as against it'a close of 49.16 on Thursday. This is the second week of losses after foreign funds pared holdings of local assets as threats of global economic recession strengthened.

Bonds however have recovered partly with the yield on the 10-year bechmark security falling 4 basis points to 5.76%, on hopes of positive announcements from RBI policy review next week. Dealers say both bonds and the local unit are likely to remain under pressure in the coming days, given India's worsening deficts both on the fiscal and current acount fronts.

"Strengthening US dollar, global credit squeeze and India's worsening balance of payments were behind INR's recent depreciation," says Rajeev Malik, head of India and ASEAN Economics, Macquarie Securities. "However current account deficits are poised to narrow in 2009-10. Capital too is likely to improve marginally. Structural foundations of a stronger rupee are in place, " he said.

Traders are hoping for softening of policy stance from the RBI, when it meets to announce its policy review on January 27 . Yields rose to the highest in almost two weeks on January 21. Banks and primary dealerships may have increased investments as yields on benchmark notes have added 54 basis points this month.

Liquidity appears to be comfotable with call money rates hovering around 4.25% at 2 30pm, near the reverse repo rate , as per CCIL. BSE sensex was down 1.2% at 8712.