The rupee recouped all losses against the dollar to end slightly up because banks sold the greenback noting the intra-day reversal in local shares amid thin volumes, dealers said.
The Indian unit ended at 48.42 against dollar compared with 48.44 on Friday. It had hit an intra-day low of 48.85.
Local stocks gained in line with European shares on short covering and amid expectations the government will announce another fiscal package soon.
Reserve Bank of India Governor D Subbarao’s meeting with Prime Minister Manmohan Singh on Monday further heightened these hopes.
The government had announced a fiscal stimulus package earlier this month, which included an additional Rs 20,000 crore spending in plan projects, and a four percentage point across-the-board cut in excise duty.
However, trading volumes in the foreign exchange market stayed thin as most foreign banks avoided taking large positions ahead of the year-end, dealers said.
It moved in the 48.18-48.85 against the dollar band on Monday. The local unit had opened firm and touched 48.18/$1 as the dollar weakened against the euro and pound sterling after crude oil prices jumped over $2 in overnight trades, dealers said.
Call rate rises
One-day call money rate ended off highs as demand for funds tapered off towards the end and supply improved, dealers said.
The rate ended at 5.30-5.35 per cent compared with Saturday’s close of 5.10-5.30 per cent for two-day loans.
It had touched an intra-day high of 5.75 per cent on Monday amid strong demand for funds in the second week of the current Reporting Fortnight.
CBLOs ended at a weighted average rate of 4.75 per cent on Monday compared with 1.90 per cent on Saturday.
“Demand had fallen by afternoon because banks have already covered reserve needs for the day. Supply is ample. Call rate should move closer to 5 per cent in he next two-three days,” said a dealer at a state-owned bank.
In the last few hours of trade, some banks were also said to be offloading their excess funds at higher rates, which in turn boosted cash supply.
Banks also parked funds at the Reserve Bank of India’s reverse repo tenders.
On Monday, banks parked Rs 47,350 crore at the RBI’s twin reverse repo tenders compared with Rs 24,105 crore on Friday.
G-Sec: Bullish on liquidity
Government securities on Monday traded on a bullish note tracking substantial improvement in liquidity condition. The yield on the 10-year government bond at the close of trading was 5.54 per cent, seven basis points lower than the previous low.
There were also comments from Deputy Chairman of Planning Commission Montek Singh Ahluwalia, where he mentioned that there was scope for monetary easing, looking at the softening of inflation and slowdown in economic growth. The market also took comfort from receding of fears over possibility of a war situation. The benchmark 10-year paper 8.24 per cent GOI 2018 closed at Rs 119.35.
The turnover on Negotiated Dealing System was noted at Rs 12,375 crore. The top-traded securities on NDS were 8.24 per cent govt bond 2018 and 7.56 per cent govt bond 2014 with turnover of Rs 5,675 crore and Rs 1,650 crore respectively.
