The story of Rupee Appreciation & Depreciation and Forex Reserves

Re falls, yields at two-week high

The foreign exchange and bond markets witnessed volatile movements on Monday, propped by global concerns and dwindling cash conditions in local markets.

While the rupee ended the day at 39.77 levels versus the dollar, bond yields rose to a two-week high. Rates in the inter-bank call money market rose to 8%. The rupee, which had closed at 39.67 on Friday, fell against the dollar as sentiment was hit by risk aversion felt in Asian markets which increased the probability of capital outflows.

In the domestic market, there was considerable demand for dollars from oil companies, while foreign fund inflows remained stunted. In the government bond market, demand for bonds was largely affected as most traders were wary of a severe crunch in cash conditions going forward. The central bank has not been intervening in the forex market as the rupee has been on a weakening mode, given that there are no significance dollar inflows.

The yield on the benchmark paper, the 7.99% bond maturing in 2017, ended at 7.54%, above Friday’s close of 7.51%. It rose to as high as 7.57% levels during the day. The market is taking cognisance of the liquidity drying up, and where the rates are headed towards, depends on what kind of cash conditions we see in the market,” said a bond dealer. Another factor is that companies will be making advance tax payouts in March, which will further take a toll on liquidity. (Full Story)



Rupee falls on oil payment, global concerns
The rupee eased on Monday on import payments, while a bout of risk aversion across Asian markets raised the prospect of further capital outflows from local shares, dealers said.

The partially convertible rupee ended at 39.775/785 per dollar, off the previous close of 39.672/682.

"Importer demand from oil companies which was not covered by the forward market caused the depreciation," said a trader with a foreign bank. "Plus, there were not too many inflows on the capital side," he added.

Inflows of foreign capital are a key driver of the rupee. Foreign funds have been net buyers of nearly $500 million of stocks so far this month, according to official data, after selling about $4 billion in January. (Full Story)


Rupee strengthens on strong Asian stocks, inflows eyed
MUMBAI: The rupee rose in early trade on Monday, with demand for the local unit bolstered by gains in Asian equity markets, which raised the prospect of higher foreign capital inflows, dealers said.

The partially convertible rupee was at 39.647/655 per dollar, a shade stronger than Friday's close of 39.672/682. (Full Story)


Dollar steadies as clues awaited to US econ health
TOKYO: The dollar steadied against the yen and the euro on Monday as many investors stayed on the sidelines ahead of US data this week waiting for further clues on the health of the economy.

The dollar slid late last week when US reports revived fears that the economy was slipping into a recession, but sentiment was improving slightly after a drop in Wall Street share prices on Friday was relatively limited, traders said. (Full Story)


Rupee weakens despite market rally; forward premia hit
MUMBAI: The bond market fell victim to uncertainty over a government official’s comments that special oil bonds could be used by banks to meet statutory liquidity ratio (SLR) requirements. The yield on the 10-year benchmark bond rose to a high of 7.54% during the day and closed at 7.51%, above its previous close of 7.45%.

Petroleum secretary MS Srinivasan had told mediapersons that the finance ministry had approved a move to allow oil bonds issued in the current fiscal year to be used by banks to meet their SLR requirements.

Banks reacted to the comment by selling bonds, only to hear that the finance minister had later clarified that he hoped the bonds, which are given to state-owned fuel retailers to compensate them for selling fuel at government-set prices, would be given SLR status. According to market sources, the minister’s comments resulted in a knee-jerk reaction by banks, which made considerable losses because of the rumour.(Full Story)



Forex reserves down $1.8 bn
MUMBAI: Bank credit has been showing signs of a gradual pick up over the past few fortnights. Data released by the Reserve Bank of India (RBI) in its weekly statistical supplement (WSS) show that bank-credit growth has risen to 22.8%. This figure has progressively risen over the past few weeks, from 21.5% in the second week of January this year. At current levels, the year-on-year bank credit stands at Rs 4.09 lakh crore.

Outstanding bank loans touched Rs 22,07,312 crore on February 1, up Rs 40,465 crore, from the previous fortnight’s levels. While food credit rose Rs 2,009 crore, non-food credit moved up Rs 38,456 crore during the fortnight. Simultaneously, outstanding deposits with commercial banks touched Rs 30,89,540 crore as on February 1, rising Rs 58,899 crore over the previous fortnight’s levels. While demand deposits rose Rs 57,794 crore, term deposits with commercial banks rose Rs 1,106 crore. Investments in government and other approved securities by banks dropped to Rs 9,50,589 crore as on February 1, down Rs 7,908 crore from the previous fortnight’s levels. (Full Story)

Source- Economics Times

Categories: Economy, inflation, Markets, Rupee, Yield