The rupee fell to the lowest level in more than two years on speculation that foreign funds would slow purchases of emerging-market assets after the International Monetary Fund (IMF) cut its forecast for global economic growth.
The currency declined for the third day and Indian shares fell as the IMF lowered the expansion estimate for this year to four per cent from 4.3 per cent, predicting a “severe” fallout if Europe fails to contain its debt crisis. The Dollar Index, which tracks the currency’s performance against six major trading partners, gained before the US Federal Reserve concludes a two-day meeting.
“The rupee is a flow-based currency and will move as such,” said Naveen Raghuvanshi, a Mumbai-based currency trader at Development Credit Bank Ltd. “Investors are awaiting the outcome of the Fed meeting to gauge the extent of stimulus that could be provided.” The rupee weakened 0.6 per cent to 48.3375 per dollar at the close in Mumbai, according to data compiled by Bloomberg, the lowest level since September 16, 2009.
Offshore forwards indicate the rupee would trade at 49.04 per dollar in three months, compared with expectations of 48.70 yesterday. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars.
BONDS RISE
Government bonds closed better on some buying by banks and companies.
The 7.80 per cent government security maturing in 2021 recovered to Rs 96.5750 from Rs 96.5050, while its yield eased to 8.33 per cent from 8.34 per cent yesterday. The 8.13 per cent government security maturing in 2022 also recouped to Rs 97.99 from Rs 97.92 on Monday, while its yield softened to 8.41 per cent from 8.42 per cent.
More From This Section
The 8.08 per cent government security maturing 2022 too firmed up to Rs 97.69 from Rs 97.60, while its yield slipped to 8.41 per cent from 8.42 per cent. The 8.28 per cent government security maturing in 2027, the 7.37 per cent maturing in 2014 and the 8.30 per cent maturing in 2040 gained at Rs 97.43, Rs 97.93 and Rs 96.70, respectively. The Reserve Bank of India, under the Liquidity Adjustment Facility, purchased securities worth Rs 47,410 crore from 16 bids at the one-day repo auction at a fixed rate of 8.25 per cent, while it sold securities worth Rs 35 crore from three bids at the one-day reverse repo auction at a fixed rate of 7.25 per cent.
CALL RATE DROPS
The call rate washed out all its gains on the overnight call money market today on more liquidity in the banking system. The overnight call money rate moved in a range of 8.30 per cent and 8.15 per cent, before concluding lower at 8.25 per cent from 8.30 per cent yesterday.