CALL MONEY
Call rates ended slightly firmer on Wednesday, with dealers expecting weakening of the rupee to hit supplies in the market. The oveernight rates opened at 7.90-8.10 %, little changed from Tuesday's close of 7.85-8%. Dealers said liquidity was comfortable, but the gradual weakness in the rupee has clouded outlook. The rupee ended at an all time low of 44.145/155 per dollar on Wednesday, on persistent dollar buying by firms and short covering by banks. Dealers said state-run banks who are traditional lenders in the money market usually lower supplies after they sell dollars in the foreign exchange market to prop up the rupee. They added that outflows towards 15-year bond sale, open market sales of treasury bills and expectations of another auction to coincide with inflows worth Rs 3,600 crore on next Monday will keep call rates above the central bank refinance rates of 7 per cent for the next few days. The call rates ended at 8-8.10%.
FORECAST: Call rates seen around 8 per cent on Thursday.SPOT DOLLAR
The rupee ended at an all-time low of 44.15/16 on Wednesday on sustained dollar demand from importers and banks covering their short positions. The rupee opened at 44.04/06, weaker from the previous close of 44.03/04. Early dollar demand saw the rupee breach past the previous all time low to 44.10/12 levels within a few minutes of trading. "There was intermittent supply of dollars by the SBI during the day, which arrested the rupee's fall," KN Dey, sr vice president, eMecklai said. The sentiment, however, remained fragile with the rupee falling further to 44.11/12 in the afternoon. The rupee saw a gradual weakening during the later half to end at 44.145/155, which was also the all time closing low. The previous all time low of 44.06/07 was recorded on May 10. Cash/spot ended at 0.25/0.50 paise, cash/tom at 0.125/0.25 paise and tom/spot at 0.1875/0.3275 paise. The RBI fixed its rate for the dollar at 44.08 as against 43.98 on Tuesday.
FORECAST: The rupee may fall to 44.20 if dollar demand sustain today.
FORWARD PREMIUMS
Forward premiums ended higher tracking a weak spot rupee and on concerns the RBI new treasury bill sale list, effective May 24 would tighten liquidity. The six-month premium ended at an annualised 2.83% compared with Tuesday's close of 2.41%.May dollars ended at 0/1 paise, June at 11/12 paise, while in the far end, November closed at 63/65 paise and December at 74/76 paise. Dealers said besides the fall of the rupee, expectations of a large government bond auction allowed premiums to rise. "There was heavy paying in the three and six month maturities," a dealer said. Dealers said the country's rising inflation rate had also added to some paying pressure. Government data released at the weekend showed the year-on-year inflation rate, measured by the wholesale price index (WPI), at 6.31 % for the week ended May 6, up from 5.94 % the previous week and at its highest since December 19.
FORECAST: Premiums seen higher on Thursday.
GILTS
Bond prices were sharply down in evening deals on Wednesday, pulled down by worries of interest rates rising on the back of a weaker currency. Prices fell 40-50 paise (0.40-0.50 Rupees) across the board with the fall more pronounced in the longer tenor instruments.
"The rupee is a major factor for the fall. The market fears that if this fall continues, the Reserve bank of India will do something to interest rates. It makes sense to stay liquid," a primary dealer said. The 12.40% 2013 bond ended at Rs 109.80 from Rs 110.70 in the morning. The 11.99 per cent 2009 bond closed at Rs 108.15 against Tuesday's close of Rs 108.55. Dealers said the market was worried about an impending liquidity crunch following the rupee's recent fall and slowing foreign portfolio investment flows. Foreign funds have been net sellers worth $121.6 million equity and debt markets during May.
FORECAST: Bond prices seen lower on Thursday.
-- Compiled by Anurag Joshi
Copyright © 2000 Indian Express Newspapers (Bombay) Ltd.