Rising stock markets push rupee up

March 16, 2009 by Prakash Dhawan · Leave a Comment
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Rupee today gained 12 paise against the US dollar to close at 51.40, the highest level this month, mainly due to the rise in the stock market indices over the last two trading sessions. The greenback weakened against most other currencies too across the globe.Both the Bombay Stock Exchange’s Sensex and National Stock Exchange’s Nifty recorded a 2.1 per cent rise today after gaining 5 per cent on Friday. What added to the sentiments was the rise in most Asian stock market indices.

“The rise in the stock markets has provided some breather to the rupee. Though importers continue to be jittery, there is a temporary respite for them and they are not buying dollar significantly,” said a forex dealer at a large public sector bank. An executive at another public sector bank said that the rupee weakened later in the day on corporate buying of the greenback to the tune of $200-300 million. The Indian currency hit a low of 51.70 in intra-day trade, but recovered on sale of the greenback by importers.

Dealers, however, said that they expected the rupee to weaken in the coming months. According to Bloomberg, offshore contracts indicate traders bet the rupee will trade at 51.58 to the dollar in a month, compared with expectations of a rate of 51.80 on March 13. 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. Futures contracts on NSE and MCX ended down, tracking the movement in spot market.

The one-month contract ended at 51.47 a dollar, compared with 51.63 on Friday. The rupee has gained 1.5 per cent since it touched a record low of 52.18 against the dollar on March 3. However, it has fallen 5.3 per cent so far in 2009. In the latest round of depreciation, triggered by a Standard and Poor’s revision of India’s sovereign rating outlook from stable to negative, the Reserve Bank of India has restricted its intervention in the market, fearing that it would suck out rupee liquidity if it sold dollars to prop up the Indian currency.

According to the latest data released by the central bank today, between April 2008 and January 2009, it has sold $31.76 billion (Rs 1,61,100 crore) to check a steep depreciation of the rupee against the US currency.

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Currency markets shrug off rate cut

March 5, 2009 by Prakash Dhawan · 1 Comment
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Bond and currency markets shrugged off Wednesday’s rate cuts by the Reserve Bank of India, with dealers pointing out that the monetary easing had not reduced the bearishness in the market. Bond yields were largely unchanged and rupee fell yet again on pressure from weak Asian stocks and stronger dollar overseas.
Both the yield on the old 10-year benchmark 8.24% paper maturing in 2018 and, the new benchmark 6.05% paper expiring in 2019 were largely unchanged at 6.42% and 6.09% respectively. The rupee ended at 51.76 against the dollar, 21 paise weaker than its previous close 51.55. Details of the buy back of bonds that happenend earlier in the day are
still awaited.

Liquidity was good with banks parking close to Rs 68,000 crores with RBI in its daily money market operations. Inflation for week ended February 13 was down 3.03% as against 3.63% for the previous week, but dealers said this was largely discounted. The Reserve Bank of India said Wednesday it was cutting two benchmark policy interest rates — the repo and reverse — by half a percentage point each.
Yields opened 20 bps lower but all the optimism only lasted for a few seconds. The pressure of excess supplies is the only thing on traders’ minds,” said a dealer at Canara Bank. RBI will sell three dated securities for Rs 12,000 crore on Friday.

The rupee recovered from day’s lows of 52.09 as state-run banks sold dollars, likely as a part of RBI intervention, dealers said. But still choppy stocks, dollar demand for arbitraging in NDF market and global dollar strength weighed. Global currencies led by euro slipped against the dollar and the yen on Thursday as investors expected the European Central Bank and Bank of England to cut interest rates later in the day to help their respective economies. Late evening, Bank of England reduced the benchmark interest rate to a record low of 0.5%.

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