Re leaps to a 12-week closing high

Mumbai, Jan 4 | Updated: Jan 5 2006, 06:20am hrs
The domestic currency leapt to a 12-week closing high on Wednesday, on expectations of a halt in the Fed rates. However, the vigilant Reserve Bank of India's (RBI) intervention to arrest any major appreciation in the rupee pulled the domestic currency from its intra-day high at 44.76 per dollar to close the trading session at 44.78/79 as against previous close at 45.04/05.

The weakening of dollar against euro and other Asian currencies resulted into the rupee receiving some boost, said a forex dealer at a private sector bank. The minutes of Tuesday's Federal Reserve meet hinted at interest rate tightening. The arbitrage opportunity because of the yield advantage between the US interest rates and the domestic interest rates resulted into a positive sentiment among investors for the rupee. Investors also drew comfort from the robust inflows by foreign institutional investors (FIIs) in the local markets.

At the forward market, premias rose with the six-month annualised dollar premia closing at 1.11% as against its previous close at 1.07 %, while the twelve-month annualised dollar premia ended at 0.87% as against its previous close at 0.85%. In wake of worries about fresh issuance of government securities worth Rs 10,000 crore, the bond markets reacted negatively. The prices of government securities fell by nearly 10-12 paise by shedding the gains.

The RBI announced the cut off for the weekly and fortnightly treasury bills (T-bill). The cut-off yield for the 91day T-bill was announced at 5.9428 % from 6.1081% in the previous week. The cut-off yield for 364-day T-bills was fixed 6.1288 % from 6.1740% two weeks earlier. The benchmark 7.38% government stock maturing 2015 ended untraded with the corresponding yields ruling at 7.07%. The 8.07% government stock maturing 2017 dipped to Rs 106.65 with the yields ruling at 7.19%, as against its previous close at Rs 106.69 giving the yield of 7.18%. At the longer tenure the 10.25% government stock maturing in 2021 ended up almost stable at Rs 126.65 with the corresponding yields ruling at 7.33%.

At the overnight call money market, the call rates ended at 5.45%-5.55% with the liquidity condition easing up.

This could be evinced from the RBIs LAF data. In the first LAF, the RBI mopped up Rs 750 crore through a reverse repo auction. In the second LAF, Rs 2,415 crore was mopped up at rate of 5.25%.