Rupee drops to near six-week low

Rupee drops to near six-week low
Business Standard, June 26, 2009, Section II, Page 3

MONEY MARKET ROUND-UP

AGENCIES Mumbai

The rupee dropped to near the lowest level in almost six weeks on speculation the nation’s importers increased purchases of foreign exchange to settle month-end payments.

The currency, which weakened 0.1 per cent to 48.605 a dollar at the close, headed for the first monthly decline since February as refiners may have stepped up dollar purchases to pay for shipments of crude oil, with the commodity poised for a fifth month of gains.

Offshore forwards contracts indicate bets the rupee will trade at 48.69 to the dollar in a month, compared with expectations for a rate of 48.65 yesterday.

Forwards are agreements in which assets are bought and sold at current prices for future delivery. Non-deliverable contracts are settled in dollars rather than the local currency.

A rally in commodity prices may boost India’s import bill. The UBS Bloomberg Constant Maturity Commodity Index of 26 raw Materials has advanced 22 per cent this year.

The rupee strengthened this morning on speculation overseas investors will boost purchases of emerging-market stocks amid signs a global recession is abating. The US yesterday reported an unexpected increase in durable goods orders for May, helping drive benchmark share indexes higher across most of the AsiaPacific region today.

The MSCI Asia Pacific Index rose 1 per cent after the Federal Reserve said the pace of economic contraction in the world’s biggest economy is slowing and South Korea raised its gross domestic product forecast. Bonds halt two-day gain

Bonds halt two-day gain

Five-year bonds halted a two-day advance on speculation investors will pare holdings to raise cash for purchases at a government debt auction tomorrow.

Yields on securities due 2014 climbed earlier as the country prepared to sell as much as Rs 15,000 crore ($3.1 billion) of bonds as part of its borrowing programme that is budgeted to raise a record Rs 3.62 lakh crore in the financial year ending March 31.

The government has increased the sale size at six consecutive auctions by 25 per cent.

The yield on the 6.07 per cent note due May 2014 climbed as high as 6.59 per cent before closing little changed at 6.53 per cent at the close in Mumbai, according to the central bank’s trading system. The price per 100-rupee face amount was 98.08.

The cost of five-year swaps, or derivative contracts used to guard against rate fluctuations, fell. The rate, a fixed payment made to receive floating rates, declined to 6.14 per cent from 6.19 per cent yesterday. Call rate ends lower


Call rate ends lower

Overnight money rates eased on Thursday as surplus funds in the banking system helped banks meet their reserve requirements comfortably. The one-day money ended at 3.00-3.10 per cent, below its previous close of 3.253.30 per cent.

Banks have to report their net liabilities to the central bank on alternate Fridays and keep 5 per cent of it with the central bank for the two weeks that follow.