Weak cues from the global equity markets and rising crude prices led the spot rupee to close weaker at 42.81/83 compared to Wednesday’s close of 42.64/65. The rupee breached the 43-mark and rose to a one-and-a-half month high of 43.05 before closing the day at 42.99/43.00.
According to dealers, the foreign investors are pulling out of global markets due to the strong dollar. The pull-out by the FIIs was coupled with the demand from oil companies for dollars as oil has been marginally inching up to $117 a barrel. The banks also bought dollars for their own requirements ahead of the the long weekend which stretches till Tuesday in Mumbai.
The forward market was dull. The activity was concentrated on the spot market due to the volatile movements. The annualised premia on six month and one year forward dollars remained flat.
Liquidity: Tightening times
The liquidity continues to remain tight. Besides the usual daily requirements, bankers were also busy covering up for the additional requirements during the long weekend. Dealers explained that the weekend in Mumbai stretches to next week, while the other financial centres are open.
The call rates at which banks lend and borrow funds for their daily requirements continued to remain at a high of 9 per cent, although the week has ended and banks are through with their CRR reporting. The Reserve Bank of India had to infuse around Rs 30,335 crore into the market in two tranches of liquidity adjustment facility (LAF).
G-sec: Bearish sentiment
The sentiment was bearish in the government securities market since the oil prices started moving up and the liquidity in the market continues to be under strain.
The yield on the benchmark ten-year paper closed at a higher yield of 9.14 per cent as against 9.09 per cent on Wednesday. However, there was good demand for the T-bills as the RBI has been auctioning 91 day T-bills only for government borrowing programme and not for the market stabilisation scheme (MSS).
