Rupee rises to 5-month high as stock inflows jump
Business Standard, May 22, 2009, Section II, Page 3
AGENCIES
The rupee rose to a five-month high as optimism the economy will rebound in Prime Minister Manmohan Singh’s second term prompted overseas investors to buy more of the nation’s shares.
The currency is set for its best week in 13 years as foreign funds bought $1.1 billion more Indian equities than they sold on May 19, the most since June 2007.
The rupee strengthened 0.2 per cent to 47.385 a dollar at the close of trade in Mumbai, according to data compiled by Bloomberg. It touched 47.29 on May 19, the strongest level since December 19. The rupee’s 5.7 per cent gain this month is the best in Asia.
Money managers based abroad are betting Singh will push reforms and unveil more stimulus packages to bolster Asia’s third-biggest economy.
“The overall sentiment is bullish on the rupee because the prospects of growth fundamentals are getting stronger,” said Sanjay Arya, treasurer at state-owned Bank of Maharashtra in Mumbai. “The rupee is going to remain attractive in the short term.” Offshore contracts indicate traders bet the rupee will trade at 47.53 to the dollar in a month, compared with expectations for arate of 47.67 yesterday.
Bonds decline
Indian bonds fell on speculation that some investors had trimmed their holdings to raise funds before a government debt auction tomorrow.
Benchmark 10-year bond yields climbed to the highest level in more than a month after the government increased the size of both the debt sales this month by 25 per cent, raising concerns the additional supply will overwhelm demand. India plans to raise a record Rs 2.41 lakh crore ($51 billion) from bond sales in the six months through September as it increases spending to revive growth in Asia’s thirdlargest economy.
“There is added pressure now on bond yields and there is no reason why it should subside in the immediate future,” said SSrikumar, chief debt trader at state-owned Corporation Bank in Mumbai. The yield on the 6.05 per cent note due February 2019 rose seven basis points to 6.43 per cent at the close of trade in Mumbai, according to the central bank’s trading system. The price fell 0.52, or 52 paise per 100-rupee face amount, to 97.29. The government will auction Rs 15,000 crore of debt tomorrow as part of its annual borrowing program.
Bonds also dropped after the central bank purchased fewer securities than it had planned. RBI bought Rs 3,642 crore of notes in open-market operations, less than the originally scheduled Rs 6,000 crore.
Call rates barely moved
Cash rates were little changed from the central bank’s main borrowing rate of 3.25 per cent on Thursday as a huge cash surplus in the system easily offset banks’ funding needs. The overnight money was trading at 3.20/25 per cent, scarcely moving from its previous close of 3.20/30 per cent.
Rates were steady near 3.25 per cent because banks having excess funds could park it with the central bank at that rate, while for banks short of cash, it was available at lower rates in collateralised borrowing and lending obligation (CBLO).
Business Standard, May 22, 2009, Section II, Page 3
AGENCIES
The rupee rose to a five-month high as optimism the economy will rebound in Prime Minister Manmohan Singh’s second term prompted overseas investors to buy more of the nation’s shares.
The currency is set for its best week in 13 years as foreign funds bought $1.1 billion more Indian equities than they sold on May 19, the most since June 2007.
The rupee strengthened 0.2 per cent to 47.385 a dollar at the close of trade in Mumbai, according to data compiled by Bloomberg. It touched 47.29 on May 19, the strongest level since December 19. The rupee’s 5.7 per cent gain this month is the best in Asia.
Money managers based abroad are betting Singh will push reforms and unveil more stimulus packages to bolster Asia’s third-biggest economy.
“The overall sentiment is bullish on the rupee because the prospects of growth fundamentals are getting stronger,” said Sanjay Arya, treasurer at state-owned Bank of Maharashtra in Mumbai. “The rupee is going to remain attractive in the short term.” Offshore contracts indicate traders bet the rupee will trade at 47.53 to the dollar in a month, compared with expectations for arate of 47.67 yesterday.
Bonds decline
Indian bonds fell on speculation that some investors had trimmed their holdings to raise funds before a government debt auction tomorrow.
Benchmark 10-year bond yields climbed to the highest level in more than a month after the government increased the size of both the debt sales this month by 25 per cent, raising concerns the additional supply will overwhelm demand. India plans to raise a record Rs 2.41 lakh crore ($51 billion) from bond sales in the six months through September as it increases spending to revive growth in Asia’s thirdlargest economy.
“There is added pressure now on bond yields and there is no reason why it should subside in the immediate future,” said SSrikumar, chief debt trader at state-owned Corporation Bank in Mumbai. The yield on the 6.05 per cent note due February 2019 rose seven basis points to 6.43 per cent at the close of trade in Mumbai, according to the central bank’s trading system. The price fell 0.52, or 52 paise per 100-rupee face amount, to 97.29. The government will auction Rs 15,000 crore of debt tomorrow as part of its annual borrowing program.
Bonds also dropped after the central bank purchased fewer securities than it had planned. RBI bought Rs 3,642 crore of notes in open-market operations, less than the originally scheduled Rs 6,000 crore.
Call rates barely moved
Cash rates were little changed from the central bank’s main borrowing rate of 3.25 per cent on Thursday as a huge cash surplus in the system easily offset banks’ funding needs. The overnight money was trading at 3.20/25 per cent, scarcely moving from its previous close of 3.20/30 per cent.
Rates were steady near 3.25 per cent because banks having excess funds could park it with the central bank at that rate, while for banks short of cash, it was available at lower rates in collateralised borrowing and lending obligation (CBLO).
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