The rupee advanced to its strongest level in almost three months after global funds added to holdings of Indian assets to benefit from growth in Asia’s third-biggest economy.
Overseas investors bought $69.7 million more Indian shares than they sold yesterday, boosting net purchases for March to $375 million, exchange data show. The rupee has advanced 1 per cent this month on optimism the government will meet its target of reducing the budget deficit to 4.6 per cent of gross domestic product in the fiscal year starting April, from 5.1 per cent in the prior 12 months.
The rupee gained 0.2 per cent to 44.755 per dollar at the 5 pm close in Mumbai, according to data compiled by Bloomberg. It earlier touched 44.715, the strongest level since January 4. Offshore forwards indicate the rupee will trade at 45.53 to the dollar in three months, compared with expectations of 45.68 yesterday. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars.
Bond yields end lower
Federal bond yields closed marginally lower on Thursday, as a rise in yields due to an uptick in food inflation was offset by demand for bonds from banks looking to meet their statutory requirements at year-end.
“Yields came off lows due to the uptick in food inflation. All eyes now on the borrowing calendar likely to be announced tomorrow, so until then, the 2022 bond should hold in a range of 8.05-8.13 per cent,” said Anoop Verma, an associate vice president with Development Credit Bank.
Traders said they were waiting for a meeting between the finance ministry and central bank officials on Friday to finalise the government’s gross market borrowing schedule for the first half of 2011-12. The government is estimated to borrow a gross Rs 4.17 lakh crore ($93.3 billion) in the upcoming fiscal year.
The yields on the most traded 8.13 per cent, 2022 bond and the second most traded 8.08 per cent, 2022 bond both closed down 2 basis points each at their respective lows of 8.06 per cent and 8.08 per cent.
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The less liquid benchmark 10-year bond closed steady at 8.01 per cent.
Total volumes on the central bank’s electronic platform stood at Rs 6,600 crore ($1.5 billion), compared with the usual Rs 10000 crore on a normal day.The benchmark five-year swap rate closed steady at 8.02 per cent while the one-year swap rate ended 1 basis point lower at 7.46 per cent.
Call rate declines further
The call rate declined further at the overnight call money market here on Thursday on surfeits of liquidity in the banking system. The call rate opened better at 7.75 per cent from 7.70 per cent yesterday and improved further to 7.80 per cent. Later, it dropped to end the day at 7.60 per cent. The Reserve Bank of India (RBI) under the Liquidity Adjustment Facility (LAF) purchased securities worth Rs 31,490 crore from 24 bids at the One-day repo auction at a fixed rate of 6.75 per cent.