Re breaches 40 mark, ends weak

MONEY MARKET ROUND-UP

Rupee: Closes down
The rupee partially recouped its losses against the US dollar, ending at 40.06 compared with 39.96 on Monday. Exporters are believed to have sold the greenback.

"Exporters were continuously selling dollars below 40 a $1 mark today," said Vikas Babu, foreign exchange dealer, Andhra Bank.

A large Bangalore-based software company sold nearly $250 million, said a dealer at a private bank. Some exporters sold dollars fearing that surging inflation may prompt the Reserve Bank of India to allow rupee appreciation, dealers said.

"If exporters hedge 50-60 per cent of their receivables, they can afford to sell dollars at these (40/$1) levels as I feel these are reasonably good levels," said a senior treasury official at another Bangalore-based software company.

However, dollar demand from oil companies and other importers kept the Indian unit under pressure.

"Dollar demand from oil companies was there above 40/$1," said a dealer at an European bank.

Rising crude oil prices also spurred buying interest from some oil retailers.

Call rates: Head north
Call money rate ended firm today on late demand after most banks parked excess funds with Reserve Bank of India's reverse repo tender, dealers said.

RBI absorbed Rs 790 billion through its reverse repo tender today, the highest amount in 22 months. On Monday, banks had parked Rs 631 with the central bank.

The 1-day call rate ended at 6.40-6.50 per cent compared with 4.75-5.00 per cent on Monday. Banks lent most excess funds to RBI at 6 per cent in reverse repo, expecting to borrow from CBLO at much lower rate and thereby make arbitrage.

G-sec: Sharp rise
Government bond prices ended sharply up today, as the surplus liquidity situation prompted buying from investors, dealers said.

Today, the Reserve Bank of India drained Rs 790.05 billion through its reverse repo tender, the highest in 22 months.

The 10-year benchmark 7.99 per cent, 2017 paper ended at Rs 100.35 or 7.9329 per cent yield-to-maturity today, higher from 99.98 rupees or 7.9901 per cent on Monday.

Dealers said most market participants now expect monetary tightening steps at the central bank's annual policy on Apr 29, which also aided buying.

"No action was seen from RBI last Friday and the market now seems to be reaching a consensus that it is not going to hike cash reserve ratio till its policy," said Ashish Vaidya, senior vice president and head of rates at HDFC Bank.

"And even if RBI hikes CRR, looking at the current liquidity situation, it is not going to affect the cash supply to a large extent."