Rupee trading near lowest for the day

The rupee is trading near its low for the day, dropping for the first time in four days on speculation of increased dollar demand from importers. The local unit had been rising for the last seven weeks as first signs of global recovery appear with stocks gaining.

However dealers said until May 16, the day when the election results start coming in, the movement in the local unit should be range bound. But things would change once there is clarity on what government would take charge.

At 3pm, the rupee was at 50.16 against the dollar, 35 paisa below its Friday���s close of 49.81. The main stock index BSE Sensex gave up most of its gains to trade a fifth of a percent at 3pm. The euro lost ground in global markets as traders booked profits after a big rally following strong-than-expected economic data from the euro zone region.

"The rupee is under pressure from cancellation of old exporter contracts, "says KN Dey, director at Basix Forex, a forex consultancy firm based in Mumbai. "Local institutions are giving it some support though. Election is going to be critical deciding factor for the local unit," he said.

Bonds are trading marginally lower as traders prepare for another auction this week. At 3pm, the yield on the 10-year benchmark security was down 2 basis points at 6.10%.

Benchmark notes climbed earlier following a four-week advance after RBI on April 21 cut interest rates. Last week���s auction of the 10-year security on April 24 attracted bids for 2.1 times the amount on offer, an ode to the surplus liquidity in the system. Dealers said bullishness in the market remains intact.