Rupee, bonds jittery over upbeat US

Reeling under the impact of the upbeat US consumer confidence data released on Tuesday, the spot rupee hit a one-year low of Rs 46.3950 to the dollar in intra-day trades before Reserve Bank of India's intervention pulled it back to 46.30/31 at close. Prices in the government securities market, too, crashed by almost Re 1 across the maturity spectrum.

The better than expected US consumer confidence data sent out strong signals that the US Federal Reserve would be inclined to hike rates a little more aggressively.

Last month, even though the data were below expectations, Federal Reserve Chairman Alan Greenspan had expressed confidence in the US recovery, dealers said, noting that this time there were other reasons to support the recovery as well.

While the rupee was directly hit in the wave of dollar buying across the world, the bond markets reacted to the possibility of the RBI following the US lead in hiking rates.

"The US consumer confidence data have shaken the confidence of the Indian markets," said a dealer with a state-owned bank.

The spot rupee opened at 46.27/28 and fell to 46.3950 on the back of dollar demand by banks. Dealers said apart from the usual month-end corporate dollar demand, there was strong corporate demand ahead of the expected further appreciation in the value of the dollar.

However, dollar selling by the RBI, through a clutch of state-owned banks, pulled the rupee up to 46.30/31 to a dollar.

Fears of the Fed hiking rates at "more than a measured rate", spooked the government securities market. The yield on the 10-year benchmark 7.37 per cent 2014 paper closed at 6.12/13 against 5.92/94 per cent on Tuesday, even though the RBI maintained the cut-off yield at today's 91-day treasury bill auction at 4.50 per cent, the same as in last week.

However, dealers pointed out that owing to bearish sentiment on the long-term interest rate outlook, the number of bids in the auction went up from Rs 4,953 crore last week to Rs 5,665 crore today.

Meanwhile, six of the 19 states which entered the market today to raise loans, succeeded in getting full subscriptions. The other 13 have kept their issues open for Thursday.