The rupee rose the most in almost 10 months on speculation that European policy makers would increase efforts to contain the region’s debt crisis, supporting demand for emerging-market assets.
The Bombay Stock Exchange’s Sensitive Index snapped a four- day decline after a central bank official from Europe, who spoke on condition of anonymity because the information is confidential, said the European Central Bank would likely consider restarting covered-bond purchases along with further measures to ease monetary conditions. “The news out of Europe has provided some comfort that a solution to the turmoil, albeit buying time, can be achieved,” said Krishnamurthy Harihar, treasurer at FirstRand Ltd in Mumbai.
The rupee rose 0.8 per cent to 49.0750 per dollar at the close in Mumbai, the biggest gain since December 1, 2010, according to data compiled by Bloomberg. Offshore forwards indicate the rupee would trade at 49.78 to the dollar in three months, from expectations of 50.32 yesterday.
BONDS DECLINE
Government bond prices declined on fresh selling pressure from banks and companies. The 7.80 per cent government security maturing in 2021 moved down further to Rs 96.5925 from Rs 96.67 yesterday, while its yield inched up to 8.32 per cent from 8.31 per cent. The 7.83 per cent government security maturing in 2018 slipped to Rs 97.4850 from Rs 97.5650, while its yield moved up to 8.34 per cent.
The 8.08 per cent government security maturing in 2022 softened to Rs 97.82 from Rs 97.8275, while its yield held steady at 8.39 per cent. The Reserve Bank of India, under the Liquidity Adjustment Facility, purchased securities worth Rs 78,565 crore from 31 bids at the one-day repo auction at a fixed rate of 8.25 per cent and also sold securities worth Rs 220 crore from three bids at the one-day reverse repo auction at a fixed rate of 7.25 per cent.
CALL RATE EASES
The call rate eased at the overnight call money market today due to lack of demand from borrowing banks. The overnight call money rate finished slightly lower at 8.25 per cent from yesterday's closing level of 8.30 per cent.
