The rupee advanced for the third time this week on optimism of capital inflows increasing as policymakers ease rules for overseas ownership of local debt.
The currency rebounded from the lowest level in more than a week, as the central bank cut the minimum holding period for foreign buyers of the nation’s infrastructure bonds to a year from three years. The government may lift a $10-billion cap on international investment in the nation’s sovereign debt, a finance ministry official said last month, asking not to be identified before a public announcement.
“There is a rumour the government may raise the cap on foreign investment in sovereign debt,” said Vikas Babu, a currency trader in Mumbai at Andhra Bank. “This would be positive for inflows, especially if risk appetite returns.”
The rupee advanced 0.1 per cent to 49.1375 per dollar in Mumbai, according to data compiled by Bloomberg. It fell to as low as 49.5625 earlier, the weakest level since October 25.
The rupee’s advance was also supported by reports of a split in the Greek government, making a proposed referendum on its bailout less likely and aiding efforts to contain Europe’s debt crisis. Offshore forwards indicate the rupee would trade at 50.03 to the dollar in three months, compared with expectations for a rate of 49.99 yesterday. Forwards are agreements to buy or sell assets at a set price and date.
BONDS IMPROVE
Government bonds improved further on sustained buying support from banks and companies.
The 7.99 per cent government security maturing in 2017 firmed up to Rs 96.30 from Rs 96.22 yesterday, while its yield moved down to 8.83 per cent from 8.85 per cent. The 7.59 per cent government security maturing in 2016 shot up to Rs 95.75 from Rs 95.54, while its yield declined to 8.76 per cent from 8.82 per cent.
The 7.40 per cent government security maturing in 2012 moved up to Rs 99.43 from 99.41, while its yield looked down to 8.62 per cent from 8.65 per cent. The 7.17 per cent government security maturing in 2015 and the 7.83 per cent government security maturing in 2018 were also quoted higher at Rs 95.95 and Rs 95.36,respectively.
CALL RATE EASES
The call rate ended slightly lower at the overnight call money market here on Thursday due to lack of demand from borrowing banks. The rate ended slightly lower at 8.48 per cent from yesterday's close of 8.50. It moved in a range of 8.55 per cent and 7.75 per cent.
