The rupee fell the most in more than two weeks as renewed concern that Europe’s debt crisis was worsening prompted investors to favour the dollar’s relative safety over emerging-market assets.
The currency retreated from this month’s strongest level of 48.8675 per dollar, reached earlier on Tuesday, after European Central Bank President Jean-Claude Trichet said the region’s debt crisis now threatens the financial system. The rupee also declined on speculation some domestic banks bought the greenback, said J Moses Harding, executive vice-president at IndusInd Bank Ltd.
“The underlying trend is bearish given the European concerns and we see tremendous demand for dollars when the rupee” streng-thens past 49, Mumbai-based Harding said.
The rupee weakened 0.7 per cent to 49.3275 per dollar in Mumbai, according to data compiled by Bloomberg.
Offshore forwards indicate the rupee would trade at 49.97 to the dollar in three months, compared with expectations for a rate of 49.55 yesterday. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars.
BONDS RECOVER
Government bonds recovered on fresh buying by banks and companies.
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The 7.80 per cent government security maturing in 2021 recovered to Rs 94.2350 from Rs 93.95 yesterday, while its yield dropped to 8.70 per cent from 8.75 per cent. The 8.08 per cent government security maturing in 2022 also bounced back to Rs 95.53 from Rs 95.15, while its yield fell back to 8.72 per cent from 8.78 per cent previously.
The 7.83 per cent government security maturing in 2018 rebounded to Rs 95.7575 from Rs 95.50, while its yield dropped to 8.70 per cent from 8.75 per cent. The 8.13 per cent government security maturing in 2022, the 7.99 per cent maturing in 2017 and the 8.28 per cent maturing in 2027 settled higher at Rs 95.89, Rs 96.78 and Rs 94.80, respectively.
The Reserve Bank of India, under the Liquidity Adjustment Facility, purchased securities worth Rs 69,325 crore from 26 bids at one-day repo auction at a fixed rate of 8.25 per cent, while under second LAF, sold securities worth Rs 1,505 crore from two bids at one-day reverse repo auction at a fixed rate of 7.25 per cent.
CALL RATE STABLE
The call rate ended stable on the overnight call money market on Tuesday. The overnight call money rate moved in a narrow range of 8.35 per cent and 8.20 per cent before concluding at its overnight closing level of 8.30 per cent.