Forex mart jittery

The London blasts hit the Indian foreign exchange market hard with the rupee sliding by one-fifth of a percentage point to the dollar, hitting a three-week low. Government bond prices fell in a knee-jerk reaction to the blasts but recovered later during the day.

There was heavy demand for the dollar, as the pound sterling sank to a 19-month low against the greenback. The partly convertible rupee traded at 43.6650/6750 against the dollar, down 0.2 per cent over Wednesday's close. It had opened at 43.60/61 in the morning.

The panic dollar buying by many foreign banks was compensated by exporters selling dollars, since they had been sitting on the fence with the rupee ruling at 43.50-60 for quite sometime, said dealers.

While the spot rupee fell, premium on near-term, forward dollars fell following exporter selling their greenback.

Six-month and one-year dollar annualised premiums closed at 1.44 per cent and 1.30 per cent, respectively, against 1.46 per cent and 1.28 per cent the day before.

Among other world currencies, the pound sterling dived 1 percentage point to a 6-week low against the euro, while the Swiss franc rose to a one-month high against the sterling.

The bond prices recovered by the end of the day after a fall in crude oil prices and the yield on US ten year treasury.

Yields on the newly re-issued 7.27 per cent government paper maturing in 2013 rose to a high of 7.096 per cent but closed lower at 7.0765 per cent following buying support by traders. The yield on 10-year US treasury fell to 3.96 per cent from 4.09 per cent.

Prices of long-term Indian papers fell by 30-40 paise in early trading sessions, but post recovery the net fall was about 15-20 paise by the end of the day. The benchmark 10-year paper 7.38 per cent 2015 closed at 7.14 per cent against a close of 7.12 per cent on Wednesday.

The fall in US crude prices to $57.50 a barrel against a record high of $ 62.10 in earlier trades helped in the recovery process.