The rupee fell as a deepening economic slump and sliding stock prices spurred overseas investors to dump local assets.
The currency extended three weeks of losses as the Sensex tumbled to a three-year low. Funds based abroad sold more local equities than they bought in the 13 trading days through March 5, data released by the capital markets regulator showed. Eight of the 10 most-active Asian currencies outside Japan weakened.
The rupee declined 0.3 per cent to 51.88 a dollar at close in Mumbai. It lost 6 per cent in the last three weeks and touched an all-time low of 52.185 on March 3. The currency may trade between 51.50 and 52.50 in the coming week, Bhatt said.
The rupee has tumbled 22 per cent in the past year, the third-worst performance among the 10 most-traded Asian currencies. South Korea’s won and Indonesia’s rupiah have declined more.
Offshore contracts indicate traders bet the rupee will trade at 52.38 a dollar in a month, compared with expectations of 52.05 on March 6.
The rupee strengthened earlier on speculation that exporters will take advantage of a three-week run of losses to repatriate overseas income.
The dollar’s so-called risk-reversal rate against the rupee, the premium on call options over put options, fell to a three-week low, showing demand dropped for contracts that allow purchases of the US currency. A call option grants the holder the right to buy an asset. The one-month 25-delta risk-reversal rate fell to 2.75 per cent, the lowest since February 17. It reached 3.5 per cent on February 27, the most since January 14.
Bonds: Yields rise
Government bonds fell for the fifth day, the longest losing streak in a month, on speculation that investors would demand bigger returns as the government steps up debt sales to finance economic stimulus packages.
Yields on the most-traded notes due in 2018 rose to a three-month high on concern that record debt sales would drive bond prices lower. Slowing inflation and two interest-rate cuts so far this year were unable to keep the yields in check, according to Srinivasa Raghavan, head of treasury at IDBI Gilts.
The yield on the 8.24 per cent note due 2018 rose 8 basis points to 6.84 per cent at close, the highest since December 4. The price declined 0.60, or 60 paise per Rs 100 face amount, to 109.40. A basis point is 0.01 percentage point.
The yield on the note has climbed 1.99 percentage points since reaching a record low of 4.85 per cent in January.
Call: Ends flat
Call money rate ended unchanged On Monday as there was ample cash with banks to manage their three-day reserve needs and to pay for government bond auctions, dealers said. Banks met reserve needs for three days On Monday as on Tuesday and Wednesday, markets will be shut on account of Id-e-Milad and Holi, respectively.
Three-day call rate closed at 3.55-3.60 per cent On Monday, unchanged from Saturday’s close for two-day loans.
MFs see stable rates
Primary issuances of certificates of deposit (CDs) rose On Monday on demand from mutual funds, who bought on anticipation rates will remain steady in the week ahead, dealers said.
Rates on short-term papers had risen by 15-20 basis points on Friday — a day after RBI slashed interest rates.
“The rates are quite high and so mutual funds preferred to deploy money in shorter-end papers,” said a dealer with a mutual fund.
On Monday, banks placed around Rs 3,300 crore of CDs. Typically banks increase CD issuances during March to meet their year-end deposit targets and also to refinance big redemptions of CDs issued earlier.
Three-month CDs were quoted at 5.70-5.90 per cent On Monday, unchanged from Friday. Three-month commercial papers were quoted at 9.40-9.55 per cent, unchanged from Friday.
