The rupee dropped for a third day on concern that Europe’s debt crisis would dampen demand for exports from Asia’s third-biggest economy.
Annual growth in overseas shipments slumped to 44 per cent in August from 82 per cent in July, government data showed yesterday. The nation’s current account, a broad measure of trade and investment flows, showed a deficit of $14.1 billion in the three months ended June, compared with a shortfall of $5.4 billion the prior quarter, the central bank said last week. The MSCI Asia-Pacific Index of shares fell after European governments signaled that bond holders may have to take bigger losses on Greek debt.
The rupee weakened 0.5 per cent to 49.40 per dollar at the close in Mumbai, the biggest loss since September 22, according to data compiled by Bloomberg. It has dropped 9.5 per cent so far this year, the worst performance among Asia’s 10 most-traded currencies. Offshore forwards indicate the rupee would trade at 50.05 to the dollar in three months, compared with expectations for a rate of 49.93 yesterday. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars.
BONDS DECLINE
Government bonds continued to decline further due to sustained selling pressure from banks and companies.
The 7.80 per cent government security maturing in 2021 declined to Rs 95.21 from Rs 95.26 previously, while its yield ruled steady at 8.54 per cent. The 8.13 per cent government security maturing in 2022 fell to Rs 96.85 from Rs 96.95, while its yield rose to 8.58 per cent from 8.56 per cent. The 7.83 per cent government security maturing in 2018 slipped at Rs 96.50 from Rs 96.59, while its yield firmed up to 8.54 per cent from 8.52 per cent. The 8.08 per cent government security maturing in 2022 also dropped to Rs 96.40 from Rs 96.54 yesterday. The 8.28 per cent government security maturing in 2027 fell to Rs 96.10 from Rs 96.30 previously. The 8.07 per cent government security maturing in 2017 dropped to Rs 98.10 from Rs 98.28 previously. The Reserve Bank of India, under the Liquidity Adjustment Facility, purchased securities worth Rs 800 crore from one bid at the one-day repo auction at a fixed rate of 8.25 per cent.
CALL RATE DIPS
The call rate ended lower at 8.00 per cent on the overnight money market on Tuesday. The overnight call rate finished lower compared to yesterday's closing level of 8.25 per cent after slipping to 7.50 per cent on Tuesday.