Rupee ends weak on oil firms' $-demand

MONEY MARKET ROUND-UP

The spot rupee opened stronger at 40.41/42 after closing on Wednesday at 40.44/45 to a dollar. Even though there were no major inflows either through portfolio investors or companies, the spot rupee appreciated on the back of cross-currency movements since all major currencies rallied against the dollar. Overseas, the euro incidentally broke the crucial barrier of $1.39 to a dollar and appreciated to around $ 1.3927.

 Globally, currencies have been appreciating against the dollar, anticipating a rate cut by the US Federal at its open market committee meeting next week and weak non-farm payroll data in the US. During the day, the market witnessed intervention by the RBI to buy dollars to stem the appreciation and, as a result, of which it ruled around 40.42/43 .

"If the RBI had not intervened, the spot rupee would have reached 40.40 to a dollar," said a dealer. Towards the second half of the trading session, demand from oil companies saw the rupee weaken and close at 40.45/46. The annualised premium for six-month and one-year forward dollars closed at 1.60 per cent and 1.70 per cent.

Money : Liquidity stays comfortable
Liquidity remained comfortable as the RBI absorbed around Rs 24,000 crore from the market against Rs 14,000 crore on Wednesday. Call rates ruled around 6.10 per cent, while in the CBLO market , funds were available below 5.5 per cent against the collateral of government securities. Volumes in the CBLO market was at Rs 35,000 crore against Rs 15,000 crore in call money.

However, dealers maintained that the liquidity may tighten after the advance tax outflows from the beginning of next week. Advance tax outflows from Mumbai is estimated at Rs 15,000-20,000 crore, while all-India figures are expected at Rs 30,000-35,000 crore.

G-sec: Prices move up
Even if liquidity was in surplus, apprehending the stance of the US federal reserve open market committee meeting and advance tax outflows next week, sentiment was cautious.

Prices moved up by 2-7 paise across maturities and the yield on the benchmark 10-year paper closed at 7.87 per cent against 7.90 per cent on Wednesday. There was brisk trading in the one-year treasury bill by public sector banks, pushing down yields on the 364-day t-bill to 7.40 per cent against the cut-off of 7.46 per cent announced in the auction by the RBI on Wednesday.

OIS and derivatives
Even if the yields in the benchmark government securities fell, the outlook remained cautious in anticipation of the advance tax outflows net week. Therefore, interest rates in overnight swap markets rose. Five-year and one-year swap rates rose from 7.10 per cent each to 7.14 per cent and 7.12 per cent, respectively.

The secondary corporate bond market remained lacklustre owing to thin trading since most investors like provident funds and mutual funds are waiting for fresh issuance at higher rates.

In the primary market, Power Finance Corporation ( PFC) may once again raise Rs 500 crore through a 5-year bond at 9.80 per cent. Since the yield curve is flat, Rural Electrification Corporation raised 10-year funds at 9.85 per cent, said a dealer.

The yields came off in the short-term markets of commercial papers and certificate of deposits. Aditya Birla Nuvo raised three-month money through commercial paper at 8.10 per cent, while Indian Overseas Bank could mop up funds for similar maturity through CD at 9 per cent on Wednesday. Similarly, IDBI and Axis Bank raised one-year funds at 9.20 per cent each.

Global markets: Dollar takes a knock
Major currencies globally continued to appreciate against the dollar following weak non-farm payroll data released last week. Euro and yen ruled around $1.3894 ( $1.3885) and $ 115.16 ( $114.01) .