Rupee rise halts after RBI intervention

MUMBAI: Heavy intervention on the part of the central bank on Thursday halted a further rise in the rupee. The intervention lead to the rupee closing on Thursday at 39.31 against the dollar, almost the same level as Wednesday’s close of 39.32.

The rupee opened strong, and hit a fresh 9-year high of 39.23/24, which was buoyed by heavy capital inflows after the US Fed rate cut. The US Fed had cut its key policy rate by 25 basis points, which triggered off a fresh set of capital flows into India. However, the high was short-lived, as state-owned banks started aggressively buying dollars then.

“There was sustained intervention by the central bank through the day, and taking a conservative estimate, one could say it bought up to $700 million through the day,” a dealer with a bank said. He added the central bank appeared to be protecting the rupee at 39.31 levels.

Rates on the forward premia market inched down; the one-month contract ended the day at 1.69% (1.97%). The six-month contract also slipped down to 1.45% (1.67%) and the annual contract ended the day at 1.20% (1.37%).

In the bond market, yields inched up, following the US rate cut, and indications of further inflows and a stronger rupee. Yield on the 10-year benchmark bond ended at 7.85%, up from the previous close of 7.84%.

The liquidity situation also was slightly stable, with bids worth Rs 11,560 crore being placed with the Reserve Bank of India’s liquidity adjustment facility window.Market stabilisation scheme auctions worth Rs 6,000 crore were conducted by the central bank for two government securities. An yield of 7.73% was announced on the 5.87% government paper maturing in 2010, while a yield of 7.79% was declared on the 11.30% government paper maturing in 2010.

Rates on the inter bank call market remained stable in the 6% region, though some stray deals were carried out at 4.5% levels. It is expected that call rates will see a rise once the CRR hike sets on November 10.

At the close, call rates were at 6.15%, which was also the high for the day, after transactions worth Rs 14,362 crore were carried out. Repo borrowing rates at the end of the day was 6.05%, after deals worth Rs 22,516 crore were struck. Collateralised borrowing rates were 6.12% at the close. The markets had opened at 6% and rose to an intra-day high of 6.14%. Transactions worth Rs 31,438 crore were carried out on the CBLO option.