Call money
Call rates ended higher on Thursday amid outflows to the repo auctions of the RBI. The overnight interest rates opened at 8.10-8.30%, as against the previous close of 7.90-8%. The RBI mopped up Rs 4,655 crore through its three repo auctions. For the one day repo, the central bank accepted the two bids received for Rs 525 crore at a cut-off rate of 8.25%. For the 4-day repo, it received 11 bids for Rs 4,125 crore, of which it accepted Rs nine bids for Rs 4,095 crore at 10 %. For the seven day repo auction, it accepted the two bids received for Rs 35 crore. "The call rates rose, once the RBI set a cut off rate of 8.25 per cent for the one day repo," a dealer said. Overnight rates rose, after the RBI set a cut off rate of 8.25 % for the one day repo auction. "Lenders stepped in which provided cushion, and allowed call rates to settle lower," a dealer said. Inflows of Rs 6,135 crore in repo reversals balanced the liquidity. At close, the rates were seen at 8.25-8.50%.
FORECAST: Call rates seen around 8.50% on Friday.Spot dollar
The rupee touched a new all time low of 45.45/46 on Thursday. The rupee opened weaker at 45.29/31, as against the previous close of 45.32/33. "The currency fell on heavy dollar buying by state run and foreign banks," a dealer said. Banks were buying dollars for their corporates for ECB interest payments and oil payments. "The demand from foreign banks came on behalf of foreign institutional investors FIIs ," a state run bank dealer said. "The RBI's repo auctions sucked out liquidity from the system, which allowed the rupee to strengthen," the head of trading with a financial institution said.This led the rupee to rebound and end higher at 45.33/34. The SBI reportedly did not resort to any significant dollar selling to support the rupee on behalf of the RBI. Forex dealers expect the rupee to trade in the 45.30-35 range on Friday. Meanwhile, the RBI fixed its reference rate for the US dollar at 45.44 as against 45.34 in the previous session.
FORECAST: Rupee seen holding current levels on Friday.
Forward premiums
Forward premiums, tracking a weak spot rupee, ended higher on Thursday. The six month premium ended at an annualised 4.41per cent (4.27 per cent), with the one year premium closing at 4.37 per cent (4.24 per cent). August dollars ended at 17/18 paise, Setpember at 34/35 paise, with February closing at 110/111 paise and March at 124/126 paise. At the inter-bank call money market, overnight rates ruled higher amid outflows towards the repo auction. The callmoney rates ended at 8.25-8.50 per cent, as against 7.90-8.00 per cent in the previous session. "There was heavy paying in the one, three and six month maturities."
The rupee has depreciated by 3.5 per cent since the beginning of the year. This is relatively modest compared to what the dollar's strength has done to other currencies.
FORECAST: Premiums seen higher on Friday.
Gilts
Short-to medium-term dated bond prices fell by 15-20 paise on Thursday. The 12.5% 2004 ended at Rs 104.50 as against the previous close of Rs 104.80. "The weakness in the spot rupee to below 45.40 levels, saw quite a many off-load bonds in anticipation of stiffer Reserve Bank of India (RBI)measures to prop up the rupee", a dealer with a primary dealership said. Call rates had opened at 8.10-8.30% levels, but the CRR hike by 0.25% - the first tranche of a two-part CRR hike by 0.50% - effective from Saturday, and a reduction in bank's refinance facilities did not have much impact on call rates or on the bond prices. "There is liquidity in the market, but sentiment is poor", a dealer said adding "It is the weakness in the rupee that affected trades in the securities market today.
FORECAST: Bond prices seen lower on Friday.
-- (Compiled by Anurag Joshi)
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