The Reserve Bank of India governor Y V Reddy's remarks on the sidelines of a central board meeting in Kolkata to the effect that inflation had to be contained at around 6-6.5 per cent fuelled a rally in the government securities market.Bond prices jumped by 50-60 paise across the board in the first half of the trading day. However, the rally petered out after a spokesman in the Prime Minister's Office said Manmohan Singh had assured the Left parties of a rate hike of the Employees Provident Fund ( EPF) rate from 8.5 per cent to 9.5 per cent.Gilt prices fell by almost 30-40 paise in reaction. The yield on the benchmark 7.38 per cent 2015 paper closed in the range of 6.72/75 per cent. Banks put in only Rs 2,500 crore in the Reserve Bank of India's reverse repo auction window today.Meanwhile, the spot rupee rallied against the dollar in lien with global dollar weakness. The dollar depreciated against both the euro and the pound sterling. This led to huge foreign institutional inflows in the market that sent the rupee soaring to 43.85/86 in opening trades, as against Rs 44.02/$ on Wednesday.During the day, the rupee went up further to a high of 43.75 before slipping to 43.95 on the back of dollar demand by importers. "Importers do not want to lose the opportunity to book their payments and this led to a pressure on both spot and forward dollars, said a dealer. The spot rupee closed at 43.93/94 to a dollar. Forward premiums remained higher due to importer covering. Six month and one year forward dollars closed at a premium of 2.08 per cent and 1.48 per cent, respectively.
