Rupee remains weak against the dollar

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Mumbai, April 5: On Tuesday, the gilts market was in a “wait and watch” mode ahead of the auction, which took place at the end of the trading hours. The yield on the 10-year benchmark was at 6.74%, almost flat from Monday’s close of 6.7498%.

Earlier in the day, the central bank set a cut-off price of Rs 100.25 at the auction of the reissued 6.85% 2012 bond and Rs 101.75 rupees on the 7.95% 2032 bond.

Dealers expect the reissued securities to actively trade in the market in the coming sessions. “The 6.85% 2012 bond is a good trading stock and we can see some good activities in the bond in the coming session,” said a trader at a primary dealer. Tuesday’s auction worth Rs 8,000 crore was the government’s first scheduled sale in the new fiscal year that began on April 1.

Oil prices remain a cause of concern, which could stoke inflation fears, said dealers. The call rates straddled around the reverse repo rate on Tuesday amidst ample liquidity. This can be inferred from the fact that the Reserve Bank of India mopped up Rs 34,265 crore by accepting 38 bids at the one-day reverse repo auction at a fixed rate of 4.75% under liquidity adjustment facility (LAF).

In the foreign exchange market, the rupee recouped its early losses to end a tad weaker on Tuesday. The rupee ended at 43.7850/7950 per dollar, off the intra-day low of 43.85.

The rupee has shown a downward bias thanks to the dollar’s rally as against the other global currencies. Recently, the dollar hit a fresh five-month high against the yen and a two-month peak against the euro, boosted by expectations that the US Federal Reserve could raise interest rates at a faster-than-expected pace if inflation picked up. Continuous scaling of oil prices has also capped the rupee’s gains, said a dealer. “With the dollar continuing to rise overseas and oil prices ruling firm, we do not expect the rupee to gain much from here,” said a dealer with a public sector bank.