Re slips 43.84 per dollar, gilt yields edge up

The rupee closed today at 43.84 per dollar, its lowest since December 27, 2004, and sharply down from yesterday's close of 43.52/53, as banks rushed to cover positions.

The greenback's overseas rally and a crash in shares prices added to bearish sentiment in the foreign exchange market.

Foreign banks bought dollars anticipating a further appreciation in the American currency. Meantime, government securities prices fell across the board in the range of 25-40 paise following the announcement of the state loan sale.

The ten-year benchmark 7.38 per cent 2015 paper closed at 6.57 per cent, which is 10 basis points higher than the Tuesday close of 6.47 per cent.

According to a foreign exchange dealer, the spot rupee tracked the dollar globally where it gained against all major currencies.

The dollar rose from 1.3350 to 1.3241 as part of technical correction versus the euro, the dealers said.

The dollar had earlier reached a seven-year high of 43. 37/38 to a dollar on the back of foreign exchange inflows following dollar bearishness.

"Today most of the foreign banks bought dollars on behalf of custodian clients who were liquidating positions in the equity markets," said a PSU bank dealer.

Players said the correction will continue for some time and the short-term outlook for the dollar will be bullish even if the long-term sentiment is bearish given the huge deficits in the United States.

Meanwhile, 20 states are set to sell 7.02 per cent development loan 2015 for a total Rs 6,000 crore on January 11. This, too, dampened sentiment on Wednesday.

The RBI received Rs 38,000 crore bids under reverse repo and call rates ruled at 5 per cent.

Dealers are of the view that with the announcement of the auction, most of the banks who were overbought pressed the panic button leading to heavy selling in gilts.