The rupee dropped to the weakest level in almost a year on speculation that gold and fuel importers stepped up dollar purchases to settle bills.
The currency fell for a fourth day after crude oil traded in New York rose 3.9 per cent to $89.34 a barrel yesterday, the highest close since August 3. India imports more than 75 per cent of its fuel requirements. Local gold demand may surge 25 per cent during the Diwali season next month, according to Rajesh Exports Ltd, the nation’s biggest jewellery maker.
“The demand for dollars from importers is strong and we could see a sustained drop in the rupee in the coming days and weeks,” said Naveen Raghuvanshi, a Mumbai-based currency trader at Development Credit Bank Ltd. “The undertone for the local currency is going to be bearish and there is nothing positive to look forward to in the short term.”
The rupee declined 0.05 per cent to 46.1950 per dollar at the close in Mumbai, according to data compiled by Bloomberg. The currency fell to 46.2725 earlier, its weakest level since September 16, 2010.
Offshore forwards indicate the rupee would trade at 46.75 to the dollar in three months, compared with expectations of 46.58 yesterday. Forwards are agreements to buy or sell assets at a set price and date.
BONDS FIRM UP
Government bonds closed firm on good buying by banks and companies.
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The 7.80 per cent government security maturing in 2021 recovered to Rs 96.75 from Rs 96.6575 yesterday, while its yield edged lower to 8.30 per cent from 8.31 per cent. The 8.13 per cent government security maturing in 2022 moved up further to Rs 98.09 from 98.03, while its yield held steady at 8.40 per cent.
The 7.83 per cent government security maturing 2018 rose to Rs 97.51 from Rs 97.43, while its yield softened to 8.33 per cent from 8.34 per cent previously. The 8.08 per cent government security maturing in 2022, the 7.99 per cent maturing in 2017 and the 7.17 per cent maturing in 2015 closed higher at Rs 97.76, Rs 98.55 and Rs 96.60 respectively.
The Reserve Bank of India, under the Liquidity Adjustment Facility, purchased securities worth Rs 3,745 crore from four bids at the one-day repo auction at a fixed rate of 8.00 per cent.
CALL RATE RECOVERS
The call rate ended stable on the overnight call money market on Thursday on alternate bouts of demand and supply. The overnight call money rate finished stable at its overnight closing level of 8.00 per cent. It moved in a range of 8.25 per cent and 7.75 per cent.