Rupee slips, G-Sec yields ease

Mumbai, August 4 | Updated: Aug 5 2005, 05:51am hrs
The yield of the benchmark government security eased at 6.97% following the announcement of a quarter percentage cut in the rates by Bank of England.

Among the highly liquid stocks, 10.25% (2015) government stock remained the most actively traded security which ended the day at Rs 125.60/65 (7.46 %).

The latest inflation data will be released on Friday and traders forecasted the rate to ease to 4.12% for the 12 months to July 23 from 4.18% the previous week.

Call rates on the overnight money market which closed at 4.75-5.00% remained quite comfortable due to improved liquidity. This has been following RBIs rupee selling intervention in the currency market and increased government spending on salaries and pensions at the start of the month.

The rupee slipped on Thursday as the Central bank and a large state-run utility bought dollars.

The Reserve Bank of India (RBI), which stayed away from the currency market between April and June, resumed its rupee-selling intervention in June after Chinas decision to revalue the yuan briefly lifted the Indian currency to a six-year peak.

The domestic currency, which has now lost nearly 1% since scaling the July peak, closed at 43.5250/5275 per dollar, 0.19% weaker than its previous close of 43.440/445.

The story was again one of sustained buying by state-run banks, which moved in when the rupee was at the 43.435 level, a trader at a state-run bank said. A large lot bought for a government company also added to pressure on the rupee.

Traders said the rupee would once again take its cue on Friday from the Central banks stance. If the RBI continues its intervention tomorrow we will see trading again in a 43.45 to 43.55 range, the trader said.

The rupee has been well supported by strong foreign fund flows in to the Indian stock market, where the benchmark Bombay stock index posted a new closing peak for a ninth straight session on Thursday.

Overseas portfolio investors have bought $6.8 billion worth of Indian shares so far in 2005, more than three-fourths of the record $8.5 billion they invested in the whole of 2004.