Rupee trades at 49.80

MUMBAI: The rupee is at a striking distance of touching 50 against the dollar. It continued to fall against the dollar on Wednesday morning to trade at 49.80. The march towards the 50 mark had begun on Tuesday and has continued today. The local unit had closed at 48.66 on Tuesday.

"The lack of any stimulus in the interm budget has greatly soured the mood for capital inflows and in turn for the local currency," says Dilip Raghuwanshi, chief forex advisor at Asit C Mehta Securities, a forex brokerage.

"NDF arbitrage too has begun in the earnest with the mood souring for the local unit," he said. Dealers say there is good support for the dollar-rupee around 49.45-50 while there could be some dollar selling coming in around 49.80.

Dealers said most of the arbitrage was concentrated in the one-month forward contracts. The one-month forward contract was quoting at 50.14 on Wednesday afternoon, weaker than the onshore spot rate. This would mean a clean 30-40 pasia arbitrage. BSE Sensex was down half a percent to trade at 8987 on Wednesday noon.

Banks regularly buy dollars locally and sell them offshore to take advantage of the high price differential, weakening the rupee in the spot market.

Bonds are trading range bound, with the yield on the new benchmark and old benchmark falling 4 bps (to 6.10%) and 7 basis points (6.43%) due to nervousness about the higher borrowings that was announced for the next fiscal. This gain in bond prices is after three straight days of falling prices.

Liquidity was good with call money available to banks at a weighted average of 4.14% for the day, near the reverse repo rate, as per CCIL.