The domestic currency was steady in early trade, as banks were wary of selling dollars ahead of the US Fed's decision on interest rates. However, the rise in the equity markets prompted banks to sell dollars, lifting the currency to an intra-day high of 39.30 a dollar. |
| Custodial banks were said to have sold the greenback on behalf of FII clients, dealers said. The US banks were among major sellers. |
| "The Sensex was up. Inflows from foreign funds should continue due to the expected Fed rate cut," said a dealer at another US bank. |
| However, the local unit could not rise above 39.30 a dollar because government-owned banks absorbed dollars on behalf of the Reserve Bank of India, dealers said. |
| Off late, RBI had been intermittently purchasing dollars to prevent the rupee from appreciating sharply. Since January, the rupee has risen 12.59 per cent against the greenback on persistent dollar inflows. |
| "Sporadic purchases by the central bank are likely to persist, as excess dollar inflows have always been a concern," said the chief dealer at a private bank. |
| "The CRR hike was needed to take care of a part of the liquidity overhang," RBI Governor YV Reddy said. |
| Calls: steady The interbank rates ended steady today despite indications that liquidity may be strained going ahead. The current cash supply in the system was enough to meet demand, dealers said. |
| The one-day call rates ended at 6.10-6.15 per cent compared with 6.05-6.10 per cent on Tuesday. CBLOs closed at a weighted average rate of 6.05 per cent, as against 6.02 per cent on Tuesday. |
| "There are no problems with liquidity right now. However, tightness could come after the auction outflows on Friday," said a dealer with a private bank. |
| The banks will pay around Rs 73.80 billion on Friday towards treasury bills auctioned today and bonds that will be sold under the market stabilisation scheme on Thursday. |
| A reduction in bids for Reserve Bank of India's reverse repo tender was one of the early signs that liquidity is under pressure, dealers said. |
| RBI today received Rs 50 billion at reverse repo bids, ompared with Rs 39 billion on Tuesday. The banks, on an average, parked Rs 300 billion daily in reverse repo last week. |
| The call rates are expected to be around 6.15-6.20 per cent until the cash reserve ratio hike becomes effective, dealers said. The 50-bps CRR hike, which is expected to impound Rs 160 billion, will come into effect from November 10 when the new reporting fortnight begins. |
| The call rates are expected to open steady around 6.15-6.20 per cent on Thursday as liquidity is seen sufficient to meet demand. |
| G-sec: Yields off-highs Yields ended off highs today with some dealers buying corporate bonds, as the Reserve Bank of India did not accept any bids at the auction of Treasury bills under the market stabilisation scheme. |
| "RBI rejected bids above Rs 5 billion at its T-bill auction today due to bids at higher yields," said a dealer at a state-run bank. |
| RBI sold 91-day T-bills worth Rs 35 billion in the week, out of which T-bills sales amounting to Rs 30 billion were under MSS. RBI has sold Rs 360 billion worth of gilts under MSS, so far this month. |
| Yields have risen by 7-10 basis points in early trade on fears that liquidity may tighten after the 50 basis points hike in cash reserve ratio takes effect on November 10. |
| The CRR hike, announced by the central bank at the monetary and credit policy review on Tuesday, is expected to draw out Rs 160 billion from the banking system. |
| "Mutual funds and primary dealers were major sellers today, as they had taken trading positions before the policy," said a dealer at an insurance company. |
| The bond volumes stood at Rs 3.94 billion, compared with Rs 4.84 billion on Tuesday. National Bank for Agriculture and Rural Development's 9.50 per cent, 2012 bonds traded at 9.17 per cent post the CRR hike, compared with 9.11 per cent on Tuesday. |
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