Heavy dollar buying leads to weaker Re

Heavy buying of dollars by major foreign banks such as HSBC and Standard Chartered Bank for their custodian clients (FIIs) led the spot rupee to close weaker at 40.05-40.06 after opening stronger at 39.92/93 to a dollar.

On the other had, foreign banks and major private sector banks were selling government securities to generate liquidity so that they could buy dollars. This led to a sharp fall in the prices of government securities.

According to a dealer, it was a peculiar situation in the market where the top traded and highly liquid government security 7.99 per cent 2017 was available at a higher yield of 7.69 per cent, whereas 7.49 per cent 2017 is ruling at 7.63 per cent.

Dealers pointed out that there was heavy selling of mostly two top traded papers "" 7.99 2019 and 8.33 per cent 2036 by few private and foreign banks.

This made 7.99 per cent stock a lucrative buy for all banks. However there was no buying support since liquidity in most public sector banks is tight.

The Reserve Bank of India was seen selling dollars in the market, which helped the spot rupee to rule below 40.00 and in the range of 39.92-39.97 during the day.